The Zacks Analyst Blog Highlights: Abbott Labs, Bristol-Myers Squibb, Biogen, United Technologies and CSX

Oct 20, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Oct. 20, 2011 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Abbott Labs (NYSE: ABT), Bristol-Myers Squibb (NYSE: BMY), Biogen (Nasdaq: BIIB), United Technologies Corp. (NYSE: UTX) and CSX Corporation (NYSE: CSX).


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Here are highlights from Wednesday's Analyst Blog:

Split News Overshadows Abbott Results

Abbott Labs (NYSE: ABT) reported third quarter earnings of $1.18 per share, a penny above the Zacks Consensus Estimate and at the higher end of the guidance range provided by the company. Earnings increased 12.4% from the year-earlier period, as higher revenues helped drive results. Including one-time items, earnings declined 66.7% to 19 cents per share.

Third quarter revenues increased 13.2% to $9.8 billion, just above the Zacks Consensus Estimate of $9.6 billion.

2011 Outlook Narrowed

Following the release of third quarter results, Abbott Labs narrowed its guidance for 2011. The company now expects 2011 earnings in the range of $4.64 to $4.66 (old guidance: $4.58 to $4.68). The Zacks Consensus Estimate currently stands at $4.64 per share.

Pipeline Update

Abbott Labs also provided an update on its pipeline. So far in 2011, the company has launched several new products or indications. These include Lupron 6-Month Depot, Androgel 1.62%, the Creon infant-specific dosage, XIENCE Nano, TREK Coronary Balloon System, the ALK gene molecular diagnostics test and the FreeStyle InsuLinx Blood Glucose Monitoring System.

Abbott Labs also submitted marketing applications for XIENCE PRIME and Humira (for ulcerative colitis).

Abbott Labs is working on boosting its vascular products portfolio and expects to launch 20 new coronary, endovascular and structural heart technologies in the next five years. These include the potential US launches of MitraClip and XIENCE PRIME (US launch expected in early 2012).

Meanwhile, the acquisition of Facet Biotech has helped strengthen Abbott Labs' early- and mid-stage oncology portfolio. The company moved elotuzumab, which is being developed with Bristol-Myers Squibb (NYSE: BMY), into phase III studies for multiple myeloma.

Abbott Labs is also working on strengthening its neuroscience portfolio and has several candidates in different stages of development for the treatment of diseases like schizophrenia, pain, Parkinson's Alzheimer's and multiple sclerosis. Abbott Labs, along with partner Biogen (Nasdaq: BIIB), moved daclizumab into a phase III study for the treatment of relapsing-remitting multiple sclerosis (RRMS).

Another promising pipeline candidate is bardoxolone, which moved into phase III studies recently for chronic kidney disease.

Abbott Labs to Split into Two Companies

Besides announcing third quarter results, Abbott Labs announced its decision to split into two separate publicly traded companies. While one company will deal in diversified medical products, the other will focus on research-based pharmaceuticals.

The diversified medical products company, with estimated sales of $22 billion, will retain the company name and will include Abbott Labs' branded generic pharmaceutical, devices, diagnostic and nutritional businesses.

The research-based pharmaceutical company, which is yet to be named, will include Abbott Labs' current portfolio of proprietary pharmaceuticals and biologics including products like Humira, Lupron, Synagis, Kaletra, Creon and Synthroid. The research-based pharmaceutical company's annual sales, based on 2011 estimates, should be almost $18 billion.

The new company's shares will be distributed to Abbott Labs' shareholders in a tax-free transaction. The split is scheduled to close by the end of 2012. The company is looking to ensure growth through this split. We currently have a Neutral recommendation on Abbott Labs, which carries a Zacks #3 Rank (short-term Hold rating).

United Technologies Beats Estimates

United Technologies Corp. (NYSE: UTX) reported third-quarter earnings per share from continuing operations of $1.47, which was above the Zacks Consensus Estimate of $1.44 and is up 13% year-over-year. The year-over-year increase in the company's earnings was primarily attributable to favorable foreign currency translation.

Total revenue for the quarter increased 8.7% year over year to $14.8 billion, including an organic growth of 6% and 4% favorable impact from foreign currency translation. Revenue was also above the Zacks Consensus Estimate of $14.5 billion.

New equipment orders at Otis were up 19% over the year-ago third quarter. Commercial HVAC new equipment orders at Carrier grew 11% including favorable foreign exchange of 4%. Commercial spares orders at Pratt & Whitney's large engine business grew marginally by 3% and at Hamilton Sundstrand were up 24% over the year-ago quarter.


Based on strong performance of the company year to date, management has raised its earnings guidance for fiscal 2011. Earnings are now expected to come in at $5.47 compared to the earlier guidance of $5.35 to $5.45 per share.  However, sales growth for the year is reiterated at 7%.

CSX Grows on Pricing Power

The third-largest U.S. railroad, CSX Corporation (NYSE: CSX), reported third quarter 2011 earnings of 43 cents per share, missing the Zacks Consensus Estimate by a penny. But the earnings figure increased 19.0% year over year from 36 cents, thanks to higher profits on solid pricing and fuel surcharges that offset higher costs.

Revenue climbed 11% year over year to $3.0 billion backed by a modest 1% volume growth, and matched our expectation. Also, pricing remained strong, compensating for the sluggish volume growth and rising fuel prices.

Operating income grew 6% year over year in the third quarter to $878 million driven by higher revenue. Operating ratio (defined as operating expenses as a percentage of revenue) detoriated 130 basis points year over year to 70.4%


CSX Corp. maintained to its long-term target of achieving 65% operating ratio by 2015.

Our Analysis

CSX Corp. generated solid financial results in the third quarter supported primarily by higher value of rail freight demand. The pricing improvement highlights the growing market demand for rail-based freight transportation services and higher fuel surcharges that offset higher costs and steeply rising fuel prices. We expect the company to remain focused on growth with increased profitability in most of its products lines, particularly in intermodal and coal markets. Higher profitability will further support investments to meet growing demand in the transportation sector. Additionally, we expect the company to focus on better pricing to allow fuel cost recovery.

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