Abbott Stock Drops Despite Earnings. Baby-Formula Sales Took a Hit.

Abbott Laboratories stock has outperformed the S&P 500 with a 17% rise so far this year. (dreamstime)

Key Points

• Abbott Laboratories’ shares dropped 3.7% even though most of its results met expectations.
• Pediatric nutrition sales in the U.S. decreased by 8.4%, with overall U.S. nutrition sales down 6.5% compared to the prior year.
• The company narrowed its 2025 adjusted earnings per share guidance to between $5.12 and $5.18, maintaining the midpoint at $5.15.

Abbott Laboratories shares were down on Wednesday despite an apparently solid earnings report, after sales of its baby formula dropped in the U.S.

Abbott’s overall third-quarter results largely matched Wall Street estimates. Adjusted diluted earnings for the quarter were $1.30 per share, in line with the FactSet consensus estimate. Sales were $11.37 billion, nearly in line with the $11.39 billion analyst consensus, and management signaled that Wall Street’s expectations for profits are on target.

Abbott narrowed its financial guidance for the second time this year, saying it now expects 2025 adjusted earnings per share between $5.12 and $5.18, compared with a previous call for between $5.10 and $5.20 a share. The midpoint of the range remains the same, at $5.15, and is in line with analysts’ expectations.

Still, the stock was down 3.7% on Wednesday, although shares of the company, which sells medical devices, diagnostics, and adult and infant nutrition brands, among other products, have risen 14% this year. The Health Care Select Sector SPDR Fund , which tracks healthcare stocks in the S&P 500, is up 3.8%.

In July, Abbott shares fell 8.5% after the company reported second-quarter results that largely met expectations but issued disappointing guidance. The stock had regained that ground, and as of the close of trading on Tuesday was up 1.2% from the day before the July selloff.

The renewed selling on Wednesday morning suggests a return of this summer’s jitters. A sore spot in the third-quarter report was the company’s nutrition business, which sells the hydration drink Pedialyte, the adult therapeutic nutrition drink Ensure, and the infant formula brand Similac, among other products.

Nutrition sales were $2.15 billion for the quarter, just below the FactSet consensus estimate of $2.21 billion. Adult nutrition sales were slightly ahead of consensus, but pediatric nutrition sales missed, coming in at $977 million, below the FactSet consensus estimate of $1.04 billion.

Abbott said that U.S nutrition sales were down 6.5% compared with the same quarter last year, and pediatric U.S. nutrition sales were down 8.4%.

“Nutrition was the largest drag in the quarter,” BTIG analyst Marie Thibault wrote early Wednesday.

On an investor call early Wednesday, Abbott CEO Robert Ford attributed the weakness in U.S. pediatric nutrition to competitive pressures. “We gave back some share that we had captured last year, when a competitor experienced a supply disruption,” Ford said. “I knew it was going to be difficult to hold onto it, to hold onto it permanently, but still, I’m disappointed that we saw that happen.”

Ford also said that Abbott had lost a large baby-formula contract with a state welfare program to a competitor, which he didn’t identify. Government purchases for the federally funded state food-aid programs known as WIC account for the majority of infant formula sold in the U.S.

In 2022, a shutdown at an Abbott infant formula plant in Michigan sparked a nationwide baby formula shortage. Abbott’s global pediatric nutrition sales fell 19% in 2022, but have been growing since then.

“I expect some of these share losses that we’ve seen in the U.S. to impact our growth rate here in U.S. pediatric for the next couple of quarters,” he said. “We faced this during the supply disruption in 2022, and we got our share back. It takes a few quarters. But I’m very confident that the team will be able to do that.”

He said that the company had won two new WIC contracts that make up for the one it lost this quarter. Those go into effect in the next fiscal year.

The company’s medical device segment, meanwhile, beat consensus estimates. Sales were $5.44 billion, better than the $5.38 billion FactSet consensus call.

On the investor call Wednesday, Ford said that he is “very comfortable” with current consensus estimates for the company’s 2026 fiscal year. The FactSet consensus now has Abbott earnings growing 10% in 2026, and sales growing 5%.

Abbott CFO Phil Boudreau said that the impact of foreign exchange rates hasn’t been as favorable compared with last year as the company had anticipated in July.

“[Foreign exchange] was less of a tailwind, which impacted reported results,” Raymond James analyst analyst Jayson Bedford wrote early on Wednesday.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com