Abbott tops quarterly estimates, but Exact Sciences deal cuts profit outlook

Abbott’s first quarter showed a clear split inside the company: its medical device business kept carrying the load, while the newly closed Exact Sciences deal immediately weighed on profit expectations. Abbott reported adjusted diluted earnings of $1.15 a share, just ahead of Wall Street’s $1.14 estimate, on revenue of $11.16 billion versus forecasts for $11 billion. Sales rose 7.8% on a reported basis and 3.7% on a comparable basis.

The strength was concentrated in Abbott’s largest business. Medical device sales climbed 8.5% on a comparable basis, powered by double-digit growth in rhythm management, electrophysiology and heart failure. That matters because those categories tend to track both hospital investment and the steady replacement cycle for implanted and monitoring technologies, suggesting demand remains solid even as health care systems face pressure to manage costs carefully.

Diagnostics was softer, rising just 1.8% on a comparable basis, though cancer diagnostics got a lift from Exact Sciences products including Cologuard and Cancerguard. Abbott completed the Exact Sciences acquisition on March 23, and said the company became a wholly owned subsidiary at closing. March 20 was the last day of trading for Exact Sciences shares on Nasdaq.

Investors focused less on the quarter than on what came next. Abbott cut its full-year adjusted earnings outlook to between $5.38 and $5.58 a share, down from a prior range of $5.55 to $5.80, and said the guidance includes 20 cents of dilution from the Exact Sciences purchase. Abbott also projected full-year comparable sales growth of 6.5% to 7.5%. Shares were down before the market opened after the profit forecast reset, a sign that even a strategically popular deal can pressure sentiment when it hits near-term margins.

Abbott paid $105 a share in cash for Exact Sciences, a transaction that implied about $21 billion in equity value and an estimated $23 billion enterprise value. Abbott said the deal gives it a stronger position in the fast-growing $60 billion U.S. cancer screening and precision oncology diagnostics market, with a broader portfolio built around Cologuard, Oncotype DX, Oncodetect and Cancerguard. Chief executive Robert B. Ford has described the acquisition as the largest in health care in the last two years and the biggest ever in diagnostics.

Abbott is also pointing investors to other parts of the pipeline. The company cited positive early results in the VERITAS structural heart study, a January collaboration with AtaCor Medical on an extravascular implantable cardioverter-defibrillator, and March data from its FreeDM2 diabetes study showing a 0.6% drop in HbA1c and 2.5 more hours a day in healthy glucose range for FreeStyle Libre users versus fingerstick monitoring. The message is that Abbott sees growth across devices, diabetes care and cancer diagnostics, but the Exact Sciences acquisition will test whether that expansion can lift the company without dragging down earnings in the meantime.