Abbott Laboratories (ABT - Analyst Report) reported fourth-quarter 2014 earnings of 62 cents per share, up 29.2% from the year-ago quarter.

We note that Abbott Labs agreed to sell its developed markets generics pharmaceutical business to Mylan (MYL - Analyst Report) in Jul 2014. The company has also decided to sell its animal health business. Hence, both these businesses have been reported as discontinued operations.

Including the discontinued operations, earnings came in at 71 cents, up 22.4% year over year. The Zacks Consensus Estimate was 68 cents.

Abbott Labs generated sales of $5.4 billion in the fourth quarter of 2014, up 5.6% year over year (on a reported basis). Sales were impacted unfavorably by foreign exchange movements to the tune of 4.6% during the quarter. Quarterly sales were below the Zacks Consensus Estimate of $5.6 billion.

Fourth Quarter in Detail

Abbott Labs operates through four segments, namely, Established Pharmaceuticals Division (EPD), Medical Devices, Diagnostics and Nutrition.

EPD sales were up 26.9% to $922 million including the negative impact of 8.5% due to currency fluctuations. Sales in key emerging markets climbed 10.6% on an operational basis (excluding foreign currency fluctuations) driven by growth in India, China and Russia.

We note that Abbott Labs completed the CFR Pharmaceuticals acquisition in Sep 2014, thereby more than doubling its branded generics pharmaceuticals presence in Latin America. In Dec 2014, the company completed its acquisition of Russia-based Veropharm.

The Medical Devices business generated sales of $1.4 billion, down 3.9% year over year (up 0.4% on an operational basis). Diabetes Care sales were down 9.6%. The Vascular business was down 2.5%, impacted by a decline in drug-eluting stent sales in the U.S. The Medical Optics business was down 0.9%. Cataract sales, accounting for almost 70% of total Medical Optics sales, increased in high-single digits, being partially offset by market declines in the refractive and corneal businesses.

The Nutrition business improved 6% year over year to $1.8 billion. Pediatric Nutrition sales were up 11.4% during the quarter fueled by market uptake of recently launched products. However, Adult Nutrition sales were weak in the U.S. due to a decline in performance nutrition along with dynamics in the institutional market segment.

Diagnostics business sales increased 3.2% year over year to $1.2 billion. Core Laboratory sales increased 2.5%, while Point of Care Diagnostics rose 13.6% year over year. Worldwide sales of Molecular Diagnostics were up 0.6%.

2014 Results

Abbott Labs reported total sales of $20.2 billion, up 3% from 2013. Earnings per share of $1.98 recorded an increase of 20.7% year over year.

2015 Outlook

Abbott Labs expects earnings per share in the range of $2.10 to $2.20 in 2015. The Zacks Consensus Estimate currently stands at $2.23. For the first quarter, earnings are projected in 41 to 43 cents. The Zacks Consensus Estimate of 42 cents is well within the guidance.

Our Take

Abbott Labs currently carries a Zacks Rank #4 (Sell). Unfavorable currency exchange rate movements continue to dampen results along with the decline in drug-eluting stents sales. The guidance disappointed expectations as well.

Some better-ranked stocks in the broader health care sector include Allergan (AGN - Analyst Report) and AbbVie (ABBV - Analyst Report). Both carry a Zacks Rank #2 (Buy).