Last update on 2024-06-05

Abbott Laboratories (ABT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyze Abbott Laboratories' (ABT) 2023 Piotroski F-Score: 6/9. Gain insights into profitability, liquidity, and operational efficiency analysis.

Short Analysis - Piotroski Score: 6

We're running Abbott Laboratories (ABT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Abbott Laboratories (ABT) scored a 6 out of 9 on the Piotroski F-Score, which evaluates the company's financial strength. They have a consistent positive net income and cash flow, but their return on assets and assets turnover ratio have declined. The operating cash flow exceeds net income, showing strong financial health. The current ratio has improved, but the leverage ratio slightly increased, indicating higher debt. They have also reduced their number of shares, signaling confidence in their financial position. However, the gross margin decreased.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score, Abbott Laboratories has a decent financial strength with a score of 6. However, investors should be cautious due to the declining return on assets and gross margin. The company shows strong cash flow and liquidity, which is a positive sign. It's worth further investigation into the reasons behind the declines in ROA and gross margin before making a final investment decision. Overall, Abbott Laboratories shows potential, but comes with some risks that need addressing.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Abbott Laboratories (ABT)

Company has a positive net income?

Netincome represents the company's profitability over a specific period. It is crucial as it indicates whether the company is generating profit or incurring losses.

Abbott Laboratories' net income for 2023 was $5,723,000,000, which is a positive number. This continues a trend of the company consistently reporting positive net income for the last 20 years, despite occasional drops. For instance, net income was as high as $6,932,000,000 in 2022 but fell slightly in 2023. Nevertheless, this strong and positive net income trend is a good indicator of sustained profitability for Abbott Laboratories, which contributes 1 point to the Piotroski Score.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the financial health and liquidity of a company. Positive CFO indicates the company generates enough cash to maintain and grow its operations.

In 2023, Abbott Laboratories (ABT) recorded a positive CFO of $7.261 billion. This means the company has a healthy cash flow that can be reinvested into its operations or used to pay down debt. Over the last 20 years, ABT's CFO has generally been positive, with significant growth, especially noticeable in recent years wherein CFO peaked at $10.533 billion in 2021. This trend illustrates ABT’s efficient operational management and ability to generate cash, thus scoring 1 point in this Piotroski analysis criterion.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability in relation to its total assets. A higher ROA indicates more efficient use of assets.

The ROA for Abbott Laboratories has decreased from 0.0927 in 2022 to 0.0775 in 2023, indicating a less efficient use of the company's assets over the past year. This negative trend is reflected in the score of 0 for this criterion. Comparing the company's ROA with the last 20 years' data and the industry median, Abbott Laboratories consistently performed below the industry median. The last 20 years show varied efficiency, with its best performance mirroring broader economic or sectoral booms (e.g., 2008, 2020). This presents concerns regarding the company's recent asset utilization.

Operating Cashflow are higher than Netincome?

This criterion checks if the company's operating cash flow exceeds net income. It's vital as it shows that the company is generating enough cash from its operations to cover its profit, indicating strong financial health.

Abbott Laboratories (ABT) showcases robust financial health. The company's operating cash flow in 2023 stands at approximately $7.26 billion, surpassing its net income of about $5.72 billion. This positive trend adds 1 point to the Piotroski score. Over the past 20 years, the operating cash flow consistently outpaced net income, reflecting effective cash management and profitability. For instance, in 2021, the operating cash flow reached $10.53 billion compared to the net income of $7.07 billion. Sustained, higher operating cash flow relative to net income underscores Abbott's efficient operations and strong cash generation capabilities.

Liquidity of Abbott Laboratories (ABT)

Leverage is declining?

Change in Leverage: A lower leverage ratio indicates a stronger balance sheet, as it signifies that the company relies less on borrowed funds for its operations. This criterion evaluates whether the company's financial leverage has improved.

For Abbott Laboratories (ABT), the leverage ratio increased from 0.1987 in 2022 to 0.2078 in 2023. This rise in leverage suggests that the company has taken on some additional debt relative to its equity. While an isolated rise in leverage doesn't inherently indicate poor financial health, it does mean ABT is less reliant on their own capital and more on borrowed funds, which comes with higher financial risk. This trend is considered negative for this specific criterion, resulting in 0 points. Historically over the last 20 years, ABT's leverage has fluctuated significantly, peaking at 0.3927 in 2016 and reaching its lowest in 2013 at 0.0789. The current rise, albeit slight, is part of these longer-term oscillations but still may be something for investors to watch closely.

Current Ratio is growing?

Current Ratio compares a company's current assets to its current liabilities and is key to assessing short-term financial health.

The Current Ratio for Abbott Laboratories has increased from 1.6285 in 2022 to 1.6379 in 2023, warranting an addition of 1 point in the Piotroski Analysis. Despite this increase, it is important to contextualize this trend within a broader timeframe. Over the past 20 years, the company's current ratio has seen fluctuations, peaking at 4.0204 in 2016, far surpassing the industry median, which peaked at 4.5486 in 2021. Thus, while the current increment is modest, it marks a positive indicator showing slightly improved liquidity and short-term financial stability for the firm. Further consistency or growth in current ratio over the coming years would reinforce Abbott Laboratories' robustness against short-term liabilities.

Number of shares not diluted?

Change in Shares Outstanding assesses the company's treasury activities and investor perception by monitoring share dilution or buybacks.

In comparing Abbott Laboratories' outstanding shares of 1,737,795,021 in 2022 with 1,734,076,358 in 2023, we find a decrease in the number of shares. Such a reduction in outstanding shares typically signals share buybacks, which can indicate the company's confidence in its financial health and a desire to return value to shareholders. The decrease in outstanding shares by 3,718,663 is a positive trend, showing the company's strategic decision to buy back shares. This trim in outstanding shares results in a score of 1 point for this criterion. Historically, Abbott's share count has seen fluctuations, but the current diminishing trend underscores a potentially bullish stance by the company.

Operating of Abbott Laboratories (ABT)

Cross Margin is growing?

Evaluating the change in Gross Margin for Abbott Laboratories (ABT) is essential as it indicates the percentage of revenue that exceeds the cost of goods sold, offering insight into the company's core profitability and operational efficiency.

The Gross Margin for Abbott Laboratories decreased from 0.5615 in 2022 to 0.5518 in 2023, indicating a worsening trend. Over the past 20 years, Abbott's Gross Margin has fluctuated between 0.5186 and 0.6208 but has generally remained competitive within its industry. Notably, the industry median Gross Margin for 2023 is 0.6463, suggesting that Abbott currently lags behind its peers. Consequently, this criterion scores 0 points.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in generating sales from its assets. It is an important indicator of operational efficiency.

In 2023, Abbott Laboratories (ABT) reported an Asset Turnover of 0.5433 compared to 0.5835 in 2022, indicating a decrease. Hence, no points are awarded for this criterion. Evaluating the historical data reveals that the Asset Turnover ratio has seen fluctuations. For instance, the ratio dropped significantly during years like 2013 (0.3966) and started rebounding in recent years, the drop to 0.5433 in 2023 demonstrates a setback in operational efficiency. Reinforcing the argument, the decreasing trend presents a picture of declining sales efficiency via asset utilization.