Document 6584919

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Broad-based health care company that discovers,
develops, manufactures, and markets products and
services
Abbott's main businesses:
◦ Global pharmaceuticals
 Oncology, Immunology
◦ Medical products
 Vision Care, Cardiovascular, Diabetes
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Pays a dividend of $1.92 (3.60%)
 Has increased for 38 consecutive years
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Customers
 Retailers, wholesalers, hospitals, and healthcare facilities
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Competitors
 Johnson & Johnson, Pfizer Inc., Baxter International Inc.
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Purchase Price=
$46.83
(12/9/10)
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Recent Price=
(11/9/2011)
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$52.94
Shares Held=
40
$ Gain/Loss=
$244.40
Current Value=
$2117.60
FV Estimate (Morningstar) = $68.00
FV Estimate (IMP)=
$103.68
1yr Target Est.=
$59.37
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52 week range= $45.07-55.61
Market Cap= $82.50 Billion
Projected Div Yield= 3.60%
P/E= 18.4
Net Profit Margin 5yr= 14.20%
ROA 5yr= 9.50%
ROE 5yr= 22.56%
Interest Coverage= 14.31
Financial Leverage= 2.66
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Sales in 2010 increased more than 14 percent
over 2009.
Cash Flow increased $1.4 billions dollars
from the previous year.
Returned $2.7 billions dollars back to
shareholders.
Invested over $3.7 dollars into R&D.
◦ Strong Leadership (Tenure)
◦ Diversification
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Medical Products Portfolio
Pharmaceutical Product Portfolio (Patent Protected)
Nutritional Product Portfolio
Diagnostics
◦ Leader in markets and Market share:
 Autoimmune diseases, HIV, testosterone replacement,
diabetes and vascular markets.
◦ Innovation
 Expect to continue creating new products and
technology
◦ Global Presence
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Pharmaceutical Operations depends heavily
on Humira and Xience for future growth.
 Humira (Autoimmune), Kaletra (HIV/AIDS), and Tricor
and Trilipix count for 27% of total sales.
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Competitors are well branded.
Rely on rapid product innovation.
 Fierce competition from industry
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Geographic expansions into new markets
(China, India, Russia)
 Emerging markets are expected to grow at three times the
rate of developed markets.
 Population growth, rising incomes, modernization of
healthcare systems, and increased focus on the treatment of
chronic diseases.
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Acquisitions
 Acquired Solvay Pharmaceuticals, bringing approximately
$2 billion in stable, branded generic sales.
 Acquired Piramal’s Healthcare Solutions business, making
Abbott the largest pharmaceutical company in India, an
$8 billion market expected to double in the next five
years
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International nutritional products business
has more than doubled its sales since 2005.
 Expect to more than double emerging market sales
within the next five years.
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Aggressive cost cutting measures could
create higher profit margins.
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Litigation:
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Legislative Issues:
◦ Clean Up Suits
◦ Patient Disputes
◦ Health Care Reform Legislation will have a negative
impact on profits.
 Increased Rebates
 Elimination of the federal income tax deduction for
prescription drug expenses of retirees for which Abbott
receives reimbursement under the Medicare Part D retiree
drug subsidy program.
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Splitting of the company could reverse cost
synergies such as increasing duplicative areas of
operations.
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On October 19, 2010, Abbott announced that it planned on
separating into two publicly traded companies.
◦ Research-Based Pharmaceutical Company
 Annual Sales: Nearly $18 Billion (based on 2011
estimates)
◦ Diversified Medical Products Company (Abbott)
 Annual Sales: Approximately $22 Billion (based on
2011 estimates)
The transaction is intended to take the form of a tax-free
distribution to Abbott shareholders.
The expected stock distribution ratio will be determined at a
future date.
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The transaction is expected to be completed by the end of
next year.
◦ Subject to the final approval of:
 Abbott board of directors
 The Internal Revenue Service
 Securities and Exchange Commission.
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Recommendations
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Strong Buy
Buy
Hold
Underperform
Sell
(Yahoo Finance)
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I think we should HOLD Abbot due to:
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Strong position in emerging markets
Well diversified business operations
Strong leadership
Strong Financials
High Paying Dividend Stock
Good Future Outlook