Abbott Laboratories

Company Description

Abbott is a global, broad-based health care company that develops, manufactures and markets pharmaceuticals and medical products, including nutritionals, devices and diagnostics. The company employs more than 68,000 people and markets its products in more than 130 countries. The company is headquartered in north suburban Chicago.

Healthy Growth

In mid-July, the company posted stellar results for the second quarter and boosted its full-year 2008 guidance. Earnings per share of 84 cents outpaced the year-prior 69 cents and beat the consensus estimate by 8%.

"Abbott achieved another quarter of strong performance across our diverse mix of global businesses, with particularly strong results internationally," said Miles D. White, chairman and chief executive officer, Abbott. "Based on our first-half results, as well as our outlook for the remainder of the year, we're raising our 2008 forecast for both sales growth and earnings-per-share. We're also confirming our expectation for continued double-digit earnings-per-share growth in 2009."

The company hiked its earnings-per-share guidance range for the 2008 full-year from $3.20 - $3.25 to $3.24 - $3.28, excluding specified items.

Full-year 2008 Wall Street estimates of $3.27 per share advanced from $3.23 over the past 60 trading days. Year 2009 projections of $3.65 climbed from $3.60 over the same time frame.

Abbott Laboratories offers a solid return on equity (ROE) of 27%, which tops the industry average of -13%.

Continued Income

In early June, the company declared a quarterly dividend of 36 cents per share, noting that this was the 338th consecutive quarterly dividend paid out by Abbott since 1924. The dividend was paid out on August 15, 2008.

The dividend translates into a yield of 2.4%, which stands high above the yields offered by its peers as most companies within ABT's industry group offer no dividend.

Burger King Biz Improves

Taking advantage of an economic sag where QSRs (quick-service restaurants) are seeing increased traffic from more traditional "casual dining" customers, Burger King (BKC) has posted another positive earnings surprise in the quarter: 37 cents per share, on $646 million in revenue.' The Zacks consensus had been 34 cents.

Fiscal year numbers were also better than expected.' Burger King brought in $1.38 per share for fiscal year 2008 (ended June), whereas the Zacks estimate anticipated $1.35.' Even with these numbers impressing, shares of BKC are down in early morning trading.' True, the market is down across the board this morning, but not by the 5% BKC is currently discounted.

Zacks senior restaurant industry analyst Ann Northrop, CFA initiated coverage of Burger King back in late June, when she put a Buy recommendation on the shares.' Her target price at the time was $30 per share,'and she had this to say: "We think BKC shares offer investors an excellent opportunity to participate in the fast-growing economies of Asia and South America, which are central to the company's expansion plans and where it has a very small presence relative to McDonalds (MCD), the category leader."

Shanghai Petro a Hold, Near-Term

Shanghai Petrochemicals (SHI) exposure to the fast-expanding Chinese economy and strong petrochemical product demand make us confident of strong volume growth. However, revocation of government price controls in the future, higher crude oil prices and increased competition are some of the major concerns for the company.

The company expects its first half 2008 net profit to decline 50% from the year-ago period. Thus, we rate the stock a Hold with a six-month target price of $33.00. Currently, the ADS is trading at 7.0x our 2008 EPADS estimate of $4.31.

Revocation of government price controls in the future, higher crude oil prices, and increased competition are some of the major concerns for the company. However, its strong fundamentals, strong management and operating efficiency are expected to improve stock performance in the future. Hence, we rate it a Hold.