Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Long Ideas

Can Abbott Laboratories make money from Coronavirus?

Abbott Laboratories (NYSE: ABT) claims it can supply 50,000 coronavirus tests a day in April 2020. Thus many investors will take a new look at the medical supply company.

The U.S. Food and Drug Administration (FDA) approved the Abbott RealTime SARS-CoV-2 EUA test for use, Bloomberg reports. Abbott’s molecular instrument the m2000 RealTime system will run the tests, a press release indicates.

Abbott claims it will ship 150,000 Covid-19 virus tests to hospitals. In addition, Abbott Diagnostics is scaling its RealTime SARS-CoV-2 EUA test production up to one million tests by the end of March.

How Abbott Laboratories can cash in on Coronavirus

In the tests, testers will use the ID Now system a small box that weighs under seven pounds, Bloomberg claims. To get material to test, testers will use a nose swab.

Demand for the COVID-19 test will be high because of the insidious nature of the coronavirus. In particular, surveys of Dutch health workers reveal an “unexpected high prevalence” indicated hidden community spread,” of coronavirus, Bloomberg reports.

Coronavirus tests are needed because the infection is mild, Marion Koopmans tells Bloomberg. To explain, Koopmans is “the head of the viroscience department at the Erasmus University Medical Center in Rotterdam.”

“There is a spectrum of disease that’s still not fully recognized,” Jan Kluytmans, a microbiologist, told Bloomberg. Hence, doctors will need means of detecting the hidden spectrum of Covid-19.

Consequently, I think there will be a huge demand for Abbott Laboratories’ test. In addition, Uncle Sam will pay for that test. Congress passed and President Donald J. Trump (R-New York) signed a $2 trillion coronavirus spending package on 27 March 2020, Business Insider reports.

Thus Abbott has a product for which there is a high demand and government funding.

Is Abbott Laboratories Making Money?

Interestingly, Abbott Laboratories (NYSE: ABT) was making money before coronavirus. For example, Abbott reported a $4.88 billion quarterly gross profit on 31 December 2019.

In addition, Abbot earned a $1.389 billion operating income and a $1.049 billion common net income for the quarter ending on 31 December 2019. Moreover, Abbott reported $8.314 billion in revenues for the same quarter. Plus, Abbott reported a 7.07% revenue growth rate for that quarter.

However, Abbott reported a -$231 million ending cash flow on 31 December 2019. Yet Abbott runs a lot of cash through its till. Abbott reported a $2.416 billion operating cash flow on the same day.

Is Abbott Laboratories a Value Investment?

Moreover, I think Abbott has a high margin of safety because of the $4.14 billion in cash and short-term investments it had on 31 December 2019. In addition, Abbott had total assets of $67.887 billion on the same day.

Thus, I think Mr. Market undervalued Abbott (NYSE: ABT) at $79.34 a share on 29 March 2020. Moreover, I predict Abbott’s stock price will shoot up because of the incredible demand for COVID-19 tests.

In particular, there will be a high demand for molecular testing for the COVID-19 Virus. Abbott claims to be a leader in molecular testing for the COVID-19 Virus. Thus, Abbott could develop more Coronavirus testing products.

Beyond, testing Abbott manufactures a wide variety of medical devices, diagnostics, and nutritional products. Additionally, Abbott is a major player in generic drugs. For instance, Abbott owns Chile’s CFR Pharmaceuticals a generic drug maker.

Is Abbott Laboratories a Good Dividend Stock?

Abbott Laboratories (NYSE: ABT) is a good dividend stock. For example, Abbott shares will pay a 36₵ dividend on 14 April 2020.

Impressively, credits Abbott with 47 years of dividend growth. Overall, Abbott offered a 1.93% dividend yield, an annualized payout of $1.44, and a payout ratio of 40.63% on 30 March 2020. Thus, I consider Abbott Laboratories a good growth stock.

In the final analysis, I like Abbott Laboratories because it offers revenue growth, a good dividend, and a high margin of safety. If you are looking for a safe stock for the coronavirus age, you need to investigate Abbott Laboratories.