Abbott Labs Vs. Thermo Fisher: Which Is The Better Healthcare Stock?

Summary:

  • Thermo Fisher and Abbott are two of our key Healthcare holdings in our fund, and both are among our top 10 holdings overall.
  • Abbott and Thermo Fisher focus on different industries which are Healthcare Equipment and Life Science Tools respectively.
  • Both show strong revenue growth compared to the market average growth rate which indicates that both companies exhibit competitive advantages within their respective main markets.
  • This analysis compares both companies in terms of Revenue Growth and Exposure, Financial Position and Profitability, Leadership Position in Respective Markets, and Valuation.

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Sean Anthony Eddy

In our analyses, we covered Abbott Laboratories’ (NYSE:ABT) geographically diverse revenues and increasing focus on its cardiovascular market segment expansion with a high TAM CAGR of 16.56%. Whereas in our last analysis of

Historical Revenue Growth

Thermo Fisher

Abbott

Revenue (Q3 2023 TTM) ($ bln)

43,421

39,959

TTM Growth %

-1.7%

-8.5%

5-year Average

16.74%

10.05%

10-year Average

14.00%

9.08%

Revenue Breakdown and Growth by Industry (2023F)

Thermo Fisher Revenue Breakdown %

Abbott Revenue Breakdown %

Thermo Fisher 6-year Average Growth

Abbott 6-year Average Growth

Market Forecast CAGR

Health Care Equipment & Supplies

9.6%

66.2%

5.2%

9.6%

5.90%

Life Sciences Tools & Services

90.4%

0%

14.6%

N/A

10.80%

Pharmaceuticals

0%

33.8%

N/A

2.9%

5.80%

Total

100.0%

100.0%

13.0%

10.1%

Revenue by Geographic Region (2022)

Thermo Fisher % Breakdown

Abbott % Breakdown

Thermo Fisher Growth Average (5-year Average)

Abbott Growth Average (5-year Average)

Combined Average

North America

54.8%

44.5%

19.7%

13.7%

16.7%

Europe

24.0%

8.4%

15.9%

9.2%

12.6%

Asia Pacific

18.1%

9.3%

11.8%

3.5%

7.6%

Other regions

3.2%

37.8%

18.4%

7.4%

12.9%

Thermo Fisher Revenue Projections ($ mln)

2022

2023F

2024F

2025F

2026F

2027F

Life Sciences Tools & Services

42,667

40,433

42,132

47,457

52,979

58,615

Growth %

16.7%

-5.2%

4.2%

12.6%

11.6%

10.6%

Health Care Equipment & Supplies

4,763

4,309

4,203

4,378

4,538

4,681

Growth %

-15.8%

-9.5%

-2.4%

4.2%

3.7%

3.2%

Eliminations

-2,515

-2,462

-2,462

-2,462

-2,462

-2,462

Total

44,915

42,280

43,873

49,372

55,055

60,834

Growth %

14.5%

-5.9%

3.8%

12.5%

11.5%

10.5%

Abbott Revenue Projections ($ mln)

2022

2023F

2024F

2025F

2026F

2027F

Health Care Equipment & Supplies

31,271

25,973

26,556

28,390

30,209

31,993

Growth %

4.2%

-16.9%

2.2%

6.9%

6.4%

5.9%

Pharmaceuticals

12,371

13,264

13,655

14,056

14,470

14,896

Growth %

-4.9%

7.2%

2.9%

2.9%

2.9%

2.9%

Others

11

11

11

11

11

11

Total

43,653

39,249

40,222

42,458

44,690

46,900

Growth %

1.3%

-10.1%

2.5%

5.6%

5.3%

4.9%

Revenue Growth and Exposure

Outperformer

Revenue Growth

Thermo Fisher

Revenue Breakdown

Tie

Geographical Breakdown

Thermo Fisher

Revenue Projections

Thermo Fisher

Overall

Thermo Fisher

Thermo Fisher Net Debt (Net Cash)

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

TTM

Debt

14,316

21,483

18,662

23,442

29,828

27,031

26,786

32,360

51,279

49,625

49,170

Cash & Cash Equivalents

5,831

1,344

452

786

1,335

2,103

2,399

10,325

4,477

8,524

6,151

Net Debt (Net Cash)

8,485

20,140

18,210

22,656

28,493

24,928

24,387

22,035

46,802

41,101

43,019

Cash to Debt Ratio

0.4x

0.1x

0.02x

0.03x

0.04x

0.1x

0.1x

0.3x

0.1x

0.2x

0.1x

Abbott Net Debt (Net Cash)

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

TTM

Debt

16,660

18,504

18,840

30,771

42,750

33,476

33,334

35,599

34,764

32,926

31,739

Cash & Cash Equivalents

8,098

4,460

6,125

18,775

9,610

4,086

4,140

7,148

10,249

10,170

8,155

Net Debt (Net Cash)

8,562

14,044

12,715

11,996

33,140

29,390

29,194

28,451

24,515

22,756

23,584

Cash to Debt Ratio

0.5x

0.2x

0.3x

0.6x

0.2x

0.1x

0.1x

0.2x

0.3x

0.3x

0.3x

Liquidity Analysis (5-year Average)

Thermo Fisher

Abbott

Cash Ratio

0.51x

0.57x

Quick Ratio

1.19x

1.08x

Current Ratio

1.75x

1.65x

Debt-To-Assets

0.52x

0.53x

Debt-To-Equity

1.04x

1.02x

Financial Leverage

2.11x

2.13x

Credit Analysis (5-year Average)

Thermo Fisher

Abbott

EBIT interest coverage

14.53x

13.46x

EBITDA interest coverage

19.89x

19.93x

CFO interest coverage

15.12x

16.45x

FCF interest coverage

3.31x

12.60x

EBITDA/Total Debt

0.24x

0.26x

EBITDA/Net Debt

0.31x

0.38x

Average

Thermo Fisher (5-years)

Abbott (5-years)

Gross Margin

46.21%

57.69%

EBIT Margin

20.46%

17.09%

Net Margin

16.30%

12.92%

ROA

8.2%

6.8%

ROE

17.2%

15.0%

ROCE

11.9%

10.6%

Expense Analysis (% of revenue)

Thermo Fisher (5-years)

Abbott (5-years)

COGS (excluding D&A)

45.9%

33.2%

Depreciation & Amortization

7.9%

9.1%

R&D

3.7%

7.0%

SG&A

22.0%

27.9%

Other Expenses (Income)

0.0%

5.7%

Interest

-1.5%

-1.5%

Efficiency Analysis

Thermo Fisher (5-years)

Abbott (5-years)

Receivables Turnover

5.34x

6.25x

Payables Turnover

6.97x

3.39x

Inventory Turnover

3.84x

2.64x

Days Sales Outstanding (days)

68.56

58.63

Days Payables Outstanding (days)

52.43

107.68

Days Inventory Outstanding (days)

95.20

138.89

Cash conversion Cycle (days)

111.34

89.84

Average

Thermo Fisher (5-years)

Abbott (5-years)

Depreciation as % of Fixed Assets

5.0%

6.2%

CapEx as % of Fixed Assets

11.7%

3.5%

CapEx as % of Revenue

15.3%

5.0%

Adjusted CapEx as % of Revenue

4.5%

4.9%

Adjusted CapEx as % of Fixed Assets

2.7%

3.5%

Free Cash Flow Margin

5.99%

16.46%

Financial Position and Profitability

Outperformer

Net Debt

Tie

Liquidity Analysis

Tie

Credit Analysis

Abbott

Profitability Ratios

Thermo Fisher

Expense Analysis

Thermo Fisher

Efficiency Analysis

Abbott

Cash Flows

Abbott

Overall

Abbott

Market Share

Abbott

Thermo Fisher

Outperformer

Market Share

8.81%

29.3%

Thermo Fisher

Market Concentration

42.15%

69.0%

Thermo Fisher

Gap Between Second Largest Player

2.60%

19.4%

Thermo Fisher

Market Leadership

4 years

7 years

Thermo Fisher

Market Share Gains

3.58%

1.5%

Abbott

Overall

Thermo Fisher

Factor

Outperformer

Valuation

Thermo Fisher

Factor

Outperformer

Revenue Growth and Exposure

Thermo Fisher

Financial Position and Profitability

Abbott

Leadership Position in Respective Markets

Thermo Fisher

Valuation

Thermo Fisher

Overall

Thermo Fisher


Analyst’s Disclosure: I/we have a beneficial long position in the shares of TMO, ABT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

No information in this publication is intended as investment, tax, accounting, or legal advice, or as an offer/solicitation to sell or buy. Material provided in this publication is for educational purposes only, and was prepared from sources and data believed to be reliable, but we do not guarantee its accuracy or completeness.

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