Shares of Abbott Laboratories fell Thursday after the diversified health-care company delivered a solid second quarter but left investors disappointed with forward guidance. Revenue in the three months ended June 30 rose 7.4% to $11.14 billion, outpacing the $11.07 billion consensus estimate, according to estimates compiled by LSEG. Organic sales , excluding Covid testing results, rose 7.5%, beating the 7.2% estimate, according to FactSet. Adjusted earnings per share (EPS) increased 10.5% on an annual basis to $1.26, edging out expectations by a penny, LSEG data showed. Why we own it Abbott is a high-quality medtech company. The stock has dealt with various overhangs since we’ve owned it, such as litigation concerns tied to its specialized infant formula; falling Covid testing sales; and concerns that GLP-1 adoption will disrupt its continuous glucose monitor business. However, Abbott’s organic sales growth continues to shine. Competitors : Dexcom , Boston Scientific and Edwards Lifesciences Most recent buy : May 29, 2024 Initiated : Jan. 29, 2024 Bottom line Abbott’s reported Q2 results were largely positive, with segment beats in Medical Devices and Established Pharmaceutical sales but misses in Diagnostics and Nutrition. Nonetheless, Abbott’s failure to increase its full-year earnings guidance, along with a third-quarter earnings guide that came in a bit below consensus estimates, sent the stock down 8%. As much as we would like to defend Abbott, which has historically been a fantastic operator, we can’t do so this time around. We like the company long-term as it does make best-in-class, lifesaving products that provide a level of resiliency to sales. However, we don’t see any reason to step in to buy more shares, even at these lower levels, given the poor guidance for both the current quarter and the full year, along with sluggish Diagnostics sales in China. ABT YTD mountain Abbott Laboratories YTD Instead, we think the prudent move is to wait until Jim Cramer has a chance to speak with CEO Robert Ford on Thursday’s edition of “Mad Money” in order to better understand the issues pressuring management’s outlook and when things may be expected to improve. As a result, we’re maintaining our 2 rating and $145-per-share price target. Guidance Management tightened their full year EPS around the $5.15 midpoint, now forecasting a range of $5.10 to $5.20 versus the wider $5.05 to $5.25 range previously provided. While the midpoint was unchanged, investors were looking for a slight increase, with estimates coming into the print sitting at $5.16, according to LSEG. The team shaved their full-year profitability outlook, now targeting an adjusted operating margin of 23.5%, the low end of the previously provided 23.5% to 24% range. Excluding Covid testing sales, the team expects to realize full-year organic sales growth of 7.5% to 8%; or 6% to 7% when including testing-related sales. For the current third quarter, management targeted adjusted EPS in the $1.28 to $1.32 range, which was short versus the $1.34 that analysts were looking for, according to LSEG. Commentary Sales of Medical Devices , its biggest and most important segment, were the standout and beat estimates, driven by strong growth in Diabetes Care, thanks to a 19.6% organic increase in continuous glucose monitoring sales, along with double-digit growth in Heart Failure, Structural Heart and Electrophysiology. Established Pharmaceutical sales also exceeded expectations and reached a milestone, delivering over $1 billion in quarterly sales for the first time across the company’s 15 key emerging markets, including India and China. Second-quarter Diagnostics sales were also a drag, missing estimates, and falling 1.4% organically; and only up 0.8% when excluding the impact of Covid tests. On the post-earnings call, however, Ford said that excluding China, which was a drag, core lab diagnostics were up 8% due to “strong underlying demand in the markets around the world.” Sales in the Nutrition segment — home to brands such as Ensure protein powder and PediaSure drinks for kids — also missed. But Ford defended the performance: “We continue to see strong demand for our Ensure and Glucerna brands in the markets around the world. And this growing demand is driven by consumers seeking a source of complete and balanced nutrition, especially for those focused on protein-rich diets and meeting the dietary requirements for managing diabetes.” Protein powders like Ensure are good for building muscle, which is beneficial for patients taking GLP-1 diabetes and obesity drugs. These drugs from the likes of fellow Club name Eli Lilly and Novo Nordisk are great for weight loss – but along with fat, patients also lose muscle. NEC litigation Regarding ongoing litigation over Abbott’s specialized formula for premature infants, management reiterated their stance, with Ford saying on the call, “This is a product that has been supported by the medical community, by the regulatory community, by the scientific community. … We’re going to stand behind.” The specialized baby formula in question is given to premature infants in neonatal intensive care units (NICUs) in hospitals. It’s often among the only ways to feed these babies. The lawsuits stem from victims alleging Abbott did not properly warn patients of the risks of NEC (necrotizing enterocolitis), a severe intestinal disease. Abbott has said there is no scientific evidence that the product causes or contributes to causing NEC. If regulators require action on the product, Ford said, Abbott will comply. He added that decisions about “how to feed the most vulnerable of American citizens here should be physicians and neonatologists and not lawyers in courtrooms.” He also noted that while the specialized preemie formula has been on the market for a long time, it only accounts for a small part of Abbott’s revenue. (Jim Cramer’s Charitable Trust is long ABT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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