Barron’s on Abbott Labs

Barron’s is sweet on yet another Buy List stock. In this weekend’s issue, Michael Santolli highlights Abbott Labs ($ABT):

Abbott Laboratories is a decidedly above-average company trading at a below-average price, a health-care leader that consistently has rewarded shareholders’ patience and taken good care of investors’ capital over many decades.

At a recent price near 49, down from a 2010 peak above 53, Abbott (ticker: ABT) is among the more compelling values in a stock market being carried toward three-year highs by riskier, more cyclical names.

Abbott, with superior historical growth, a well-balanced revenue mix and powerful core health-care franchises, merits a substantial premium over pure pharmaceutical companies, which face regulatory pressures and patent expirations that will hurt key products.

Yet at 10.7 times forecast 2011 profits of $4.59 a share, up from $4.17 in 2010, Abbott’s price/earnings ratio is only about 1½ multiple points above both Merck’s (MRK) and Pfizer’s (PFE), and about 1½ points lower than similarly balanced Johnson & Johnson’s (JNJ).

(…)

This year, the company will focus more on building cash than making acquisitions. Abbott boosted its dividend in February for the 39th straight year, to an annual $1.92 a share, taking its yield near 4%. Given that yield, plus Abbott’s demonstrated ability to raise earnings at a low-double-digit clip, the stock should deliver upside of 25% or better over the next two years–even if it doesn’t win the enhanced valuation it deserves.

Posted by on April 2nd, 2011 at 8:28 am


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