Boston, MA 10/13/2014 (wallstreetpr) – Goldman Sachs Group Inc (NYSE:GS) expects nutritional business as a key driver for growth opportunities for Abbott Laboratories (NYSE:ABT). The brokerage believes that the company could use the untapped business opportunities in the sector for its future uptick.
Analyst David Roman said that there were untapped geographies for the adult nutritional business. He pointed out the undeveloped opportunity in China that provides a possible $3.4 billion market. He said that given his analysis of nutritional business, stabilizing landscape for pediatric, he believes nutritional business would be a key driver of the brokerage’s fundamental component of its thesis. The analyst estimates 45% of forwards earnings growth to come from Nutritional business between the years 2015 and 2017.
Goldman Sachs Group Inc (NYSE:GS) said it formed its opinion after looking into its nutritional business in the context of its three-way Buy opinion on the shares of Abbott Laboratories (NYSE:ABT), namely strategic optionality, improving fundamentals and M&A activity. Roman said that the nutritional business was an important theory of its confidence in the business base.
China Adult Nutritional
Analyst expects sales from China adult nutritional market to reach $55 million in the next year and to $234 million by the end of the year 2017. He pointed out the growth in aging worldwide population with the United Nations projecting doubling of 50+ populations by the year 2050. The brokerage believes it was a compelling backdrop for the company to form an underdeveloped worldwide adult nutritional market.
Analyst Roman expects Abbott Laboratories (NYSE:ABT) to gain 1.5 percentage points of margin per year from the nutritional business until the year 2017 with most of the expansion expected to come in the next year.
Raises EPS Estimates
As a result of increasingly favorable outlook, the brokerage has increased its EPS estimation for the current year to $2.21 from $2.20 and to $2.50 from $2.42 in the next year. Similarly, for the year 2016, analyst Roman has lifted his EPS projection to $2.91 from $2.83 estimated by him earlier.
The brokerage has reiterated its rating of Buy with a price target of $49 on the shares of Abbott Laboratories (NYSE:ABT) based on valuation. It cited margin progression, emerging markets growth, inefficient use of cash and forex headwinds as key risk factors.