As the pandemic eases across much of the world, the need for Covid-19 testing is diminishing.
Demand is dropping fast enough that
(ticker: ABT), a major maker of Covid-19 rapid tests, is now sharply reducing its profit forecast for the year.
Abbott highlighted declining rates of Covid-19 in the United States and elsewhere in the developed world, as well as public health recommendations in the United States that fully vaccinated people generally do not need to be tested for Covid-19 unless they experience symptoms.
“While it is positive that these external events and trends signal an accelerated return to normal for many countries, they have suddenly and fundamentally impacted the current and expected market demand for Covid testing,” CEO Robert said on Tuesday. Ford during a call to investors.
Abbott now expects full-year adjusted diluted earnings of between $ 4.30 and $ 4.50 per share, down from the $ 5 per share it previously forecast. Analysts expected Abbott to earn $ 5.04 a share in 2021. Shares of the company fell 9.3% on Tuesday and recently traded at $ 107.95. For the year, the stock is effectively flat.
Analysts lowered their stock price targets in response to the update. “Stock action… is unfortunately appropriate, but we still see reasons to stay outperformed,” wrote Jayson Bedford, analyst at Raymond James, who lowered his price target to $ 116 from $ 130.
Barron wrote in March 2020 that Covid-19 testing would not be a long-term revenue driver for testing companies. That was before the pandemic exploded in the United States, but the success of the vaccination campaign here has undermined the market for long-term Covid-19 testing that some expected to grow.
Abbott sells a range of Covid-19 tests, including an over-the-counter rapid Covid-19 test for home use and a number of rapid point-of-care tests. At the end of April, the company said sales related to Covid-19 tests were $ 2.2 billion for the first quarter of fiscal 2021. They were $ 2.4 billion in the fourth quarter of the year. ‘fiscal year 2020.
At that time, the outlook for a pandemic looked very different, with rates of Covid-19 cases stable. “We couldn’t have predicted what happened over the past few weeks,” said Ford.
Abbott, he added, was in discussions with governments and businesses about providing tests to support returns to work and school in late April.
The last few weeks have changed everything. Thursday, the company said it would cost up to $ 700 million to scale down its manufacturing network for Covid-19 tests. These costs include asset write-downs, contract cancellations and “employee costs”.
Nonetheless, Abbott’s new earnings estimate would still represent an increase of over 20% over its 2020 earnings, at the high end.
Write to Josh Nathan-Kazis at [email protected]