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Abbott Laboratories (ABT): Q2 2026 results, my verdict

2026-07-18 ·

ABT: see the full analysis on Lubin Investment

Abbott just raised its full year 2026 guidance, driven by strong growth in its FreeStyle Libre glucose sensor. But my quality filter only validates half my criteria, for a specific reason tied to five year growth. The price, meanwhile, tells a story you would not expect from such a well known stock. Here is how I read it.

A quarter that beats expectations, and raised guidance

Abbott Laboratories reported second quarter 2026 results on July 16, 2026: adjusted earnings per share of 1.31 dollars, slightly above the 1.28 dollars analysts expected, on revenue of 12.59 billion dollars, essentially in line with consensus. Sales grew 13.0% on a reported basis and 4.8% on a comparable basis (that is, once currency effects and recent acquisitions or divestitures are stripped out, to measure only real organic growth of the existing business). CEO Robert Ford called this quarter an acceleration from the prior two.

Alongside these results, Abbott raised its full year 2026 adjusted earnings per share range to 5.45-5.60 dollars, up from 5.38-5.58 dollars previously, while maintaining its full year comparable sales growth target of 6.5% to 7.5%. The company also returned 2.1 billion dollars to shareholders this quarter, combining dividends and buybacks.

The quarter's real engine: the FreeStyle Libre glucose sensor

The Medical Devices segment is the real engine of this quarter, with 14.2% organic growth, driven by several product families (diabetes care, cardiac electrophysiology, structural heart, neuromodulation). The name that comes up most is FreeStyle Libre, the skin worn sensor that continuously measures blood sugar levels without a finger prick: its sales jumped 24.7% organically this quarter, reaching 1.3 billion dollars in just these three months, and the entire continuous glucose monitoring sensor family topped 2 billion dollars in quarterly sales for the first time. In May 2026, Abbott also received CE mark approval (European market authorization) for Libre Duo, described as the world's first wearable sensor to measure both glucose and ketone bodies (molecules the body produces when it lacks available sugar, a useful indicator particularly for type 1 diabetics).

The Diagnostics segment offers an interesting complementary signal: US core laboratory sales grew 7.5%, a figure Robert Ford describes as a useful indicator of broader healthcare activity, because a hospital or lab ordering more tests generally reflects rising medical activity overall, not just Abbott's own performance. Over the next twelve months, the company also plans US launches of several new products: Libre Duo, the Amulet 360 (a device that occludes the heart's left atrial appendage to reduce stroke risk in certain patients with atrial fibrillation), a coronary intravascular lithotripsy system (a technique that fragments calcium deposits in heart arteries using shockwaves before a stent is placed), and the TactiFlex Duo PFA catheter (a tool used to treat certain heart rhythm disorders).

Why my quality filter is only half convinced

Here is the paradox of this quarter: the news is good, but my quality filter validates only 5 out of 10 criteria for Abbott, a notably weaker score than ASML or Morgan Stanley, which I just covered for the same period. The reason lies in how my filter looks at five year growth rather than a single quarter, and it is a textbook case for understanding why one good period is not enough to judge a company.

Abbott's revenue went from 34.6 billion dollars in 2020 to 43.1 billion in 2021, a surge tied to massive sales of Covid-19 screening tests during the pandemic. Once that exceptional demand faded, revenue fell back to 43.7 billion in 2022 and 40.1 billion in 2023, before gradually climbing to 42.0 billion in 2024 and 44.3 billion in 2025, a new record but only slightly above the artificial 2021 peak. Measured over this five year window, average growth comes out to just 0.6% a year, which explains the failing criterion in my filter, even though the recent trend (4.8% organic growth this quarter, accelerating) is far better than that five year figure suggests. This is a textbook base effect: the artificial Covid bump flattens the real trend of the period that follows.

Net income tells an equally misleading story if taken at face value: 4.5 billion dollars in 2020, 7.1 billion in 2021, 6.9 billion in 2022, 5.7 billion in 2023, then a jump to 13.4 billion in 2024 before falling back to 6.5 billion in 2025. That 2024 spike comes largely from close to 6 billion dollars in gains unrelated to core operations that year, an exceptional amount that mechanically inflates the figure without reflecting a genuine improvement in the business. This is precisely why I prefer to look at free cash flow, less prone to this kind of one-time accounting swing: 5.7 billion dollars in 2020, 8.6 billion in 2021, 7.8 billion in 2022, 5.1 billion in 2023, 6.4 billion in 2024, then 7.4 billion in 2025, a new record confirming that this recent quarter fits a genuine recovery, not just a one-off blip.

Other weaknesses worth understanding before investing

Two other criteria deserve an explanation rather than just a mention. First, the cash conversion cycle (the number of days between when Abbott pays its suppliers and when it collects from customers, once inventory is accounted for) comes out to 89 days, a fairly long stretch that ties up capital in day to day operations rather than freeing it for other uses. This is fairly common among diversified medical device makers, who must maintain large inventories worldwide and deal with the often slow payment cycles of hospitals and public health systems. Second, net debt relative to free cash flow comes out to 4.07, meaning it would take a bit over four years of cash generated to repay all net debt if Abbott used that cash for nothing else: a moderate level, above my 3 year caution threshold, but manageable for a company this stable and this size.

Neither of these two points is disqualifying on its own, but together they explain why Abbott lands in the middle of my quality ranking rather than near the top alongside a monopoly like ASML. A long cash conversion cycle and moderate leverage are the kind of structural traits I want readers to learn to recognize, not treat as a red flag by themselves: they matter mostly in how they interact with everything else, including the price you pay to own the business.

The price: a real surprise for such a well known stock

This is where the quarter gets genuinely interesting. The P/FCF (share price divided by the free cash flow it generates) comes out to 26.3 times, a level my filter flags as stretched rather than cheap taken in isolation. But my reasonable buy price model, which projects free cash flow per share five years out, puts Abbott's suggested entry price at 122.55 dollars, against a current share price of 100.68 dollars. In other words, by this calculation, Abbott is trading today below my reasonable buy price, one of the rare cases among the large caps I cover where this specific criterion turns green rather than red.

How do you reconcile a P/FCF that looks elevated with a model that says the price is reasonable? The two measure different things. The 26.3 times P/FCF compares today's price to cash generated over just the last twelve months, a single snapshot. My buy price model instead projects expected free cash flow per share growth five years out before discounting an exit value: it therefore captures the recent recovery (free cash flow rebounding from 5.1 to 7.4 billion dollars since 2023) and bets it continues, exactly what this week's raised guidance and this quarter's 4.8% organic acceleration seem to confirm. For a stock of only middling quality in my filter (5 out of 10 criteria), paying a reasonable price rather than a premium is exactly the setup to favor: middling quality makes a margin of safety on price all the more useful.

How I read it

Abbott illustrates well why I always separate quality from price before deciding. On quality, the quarter is good and guidance was raised, driven by a genuine product success with FreeStyle Libre, but five year growth is still weighed down by the post-Covid hangover, which explains a score that falls short of the strongest names in my filter. On price, however, Abbott is trading today below my fair value estimate, a rarer setup than one might think for such a widely known consumer facing stock. This is exactly the kind of nuance, middling quality but a fair price rather than near perfect quality but a stretched price as with ASML, that I wanted to be able to compare in seconds for any stock, which is what pushed me to build my analysis tool. You can find the full breakdown on the Abbott analysis page and my methodology.

FAQ

Why is FreeStyle Libre so important for Abbott?

It is a skin worn sensor that continuously measures blood sugar without a finger prick. Its sales grew 24.7% organically this quarter to 1.3 billion dollars, making it the main growth driver of the Medical Devices segment, Abbott's most dynamic business.

Why does Abbott's 5 year growth look like only 0.6% a year when this quarter is good?

Revenue surged in 2020-2021 thanks to Covid-19 screening tests, then fell back once that demand faded in 2022-2023, before gradually climbing again. Measured over this window, the average flattens the real recent trend, which is better than that figure suggests (4.8% organic acceleration this quarter).

Why isn't Abbott's 2024 net income (13.4 billion dollars) a good indicator?

That figure is inflated by close to 6 billion dollars in gains unrelated to core operations that year. Free cash flow, less prone to this kind of one-time accounting swing, is a more reliable measure of the real profitability trajectory.

How can a 26.3 times P/FCF coexist with a price judged reasonable?

P/FCF compares today's price to cash generated over the last twelve months, a single snapshot. My buy price model projects expected free cash flow growth five years out: it captures Abbott's recent cash flow recovery and bets it continues, which this week's raised guidance seems to confirm.

Should I buy Abbott stock after these results?

Quality is only middling in my filter (5 out of 10 criteria, weighed down by 5 year growth), but the price sits below my fair value estimate under my model. This is not personalized investment advice, do your own research.

ABT: see the full analysis on Lubin Investment

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).