Abbott Laboratories (ABT) recently released its 2nd quarter 2015 results.

The company saw adjusted earnings-per-share grow 6.1% to $0.52 per share from $0.49 per share in the same quarter a year ago.

Abbott Laboratories left its adjusted earnings-per-share guidance for full fiscal 2015 unchanged at $2.10 to $2.20 per share. The company had adjusted earnings-per-share from continuing operations of $1.98 in fiscal 2014. Abbott Laboratories outlook is for earnings-per-share growth of between 6% and 11% for fiscal 2015.

6% to 11% earnings-per-share growth actually significantly understates Abbott’s real underlying business growth. On a constant-currency basis, the company is expecting earnings growth of 13% to 18% in fiscal 2015.

The company’s management expects headwinds from currency effects of around 7% in fiscal 2015. Abbott Laboratories is experiencing strong growthdespite negative currency effects.

The company’s growth would be much higher if the dollar had not appreciated so much in the last year. When this trend reverses, Abbott Laboratories stands to benefit.

Business Overview

Abbott Laboratories is a diversified health care company that manufactures and sells nutrition products, medical devices and diagnostic equipment, and pharmaceuticals.

Abbott Laboratories owns the Similac, Pedialyte, and Ensure brands – making the company #1in adult nutrition globally and #1 in pediatric nutrition in the U.S.

The company operates in 4 segments. Each segment is shown below along with the percentage of total revenue generated for Abbott Laboratories in its most recent quarter:

• Diagnostics generated 23% of total revenue
• Nutrition generated 33% of total revenue
• Medical Devices generated 25% of total revenue
• Branded Generic Pharmaceuticals generated 19% of total revenue

Abbott Laboratories is truly a global business. The company generated just 31% of sales in the United States in its most recent quarter. The remaining 69% of sales were from international markets.

Safety Analysis

Abbott Laboratories has invested heavily in emerging markets. These investments are paying off… Emerging market sales grew 20.6% on a constant-currency basis in Abbott Laboratories’ most recent quarter.

The company has had success in emerging markets because it emphasizes manufacturing in the country where goods are sold. This reduces currency fluctuation risks and builds connections with the communities, companies, and governments the company serves.

Abbott Laboratories large international business gives it an advantage over large health care businesses that focus more on the United States. Abbott Laboratories has more exposure to faster growing markets.

One would think that too much exposure to international markets would hurt Abbott Laboratories during recessions, but that is not the case.

Abbott Laboratories managed to grow revenue, earnings, and dividends each year through the Great Recession of 2007 to 2009. Consumers and governments typically do not cut back on health care expenditures regardless of the economic climate. Abbott Laboratories stock fell just 4.95% in 2008 while the S&P 500 declined 38%.

Abbott Laboratories carries around $7 billion in debt and has $3 billion in cash on hand. The company generated about $3.5 billion in net profit in 2014. Abbott Laboratories is conservatively financed.

Future Growth & Dividends

Abbott Laboratories has paid increasing dividends for 43 consecutive years, excluding the effects of spin-offs. The company’s long dividend streak makes Abbott Laboratories a Dividend Aristocrat. Click here to see the current list of all 52 Dividend Aristocrats.

Despite over 4 consecutive decades of dividend growth, Abbott Laboratories still has a long growth runway ahead.

Abbott Laboratories’ emerging market penetration gives it excellent long-term growth prospects. The combination of emerging market economic growth and aging populations provide a favorable macroeconomic environment for Abbott Laboratories.

The company further increased its exposure to emerging markets with its recent acquisitions of CFR Pharmaceuticals and Veropharm in the recent past. The company is targeting constant-currency adjusted earnings-per-share growth of around 15% in fiscal 2015.

Abbott Laboratories should continue to grow quickly over the next several years. If a global recession were to occur, management has plenty of ‘dry powder’ to pursue further acquisitions in international markets.

Dividends should also continue to grow rapidly for Abbott Laboratories. The company has a payout ratio of just 41%. Abbott Laboratories still has room to grow its dividend payments faster than overall company growth if management chooses to do so. Abbott Laboratories currently has a 1.9% dividend yield.

Valuation

Abbott Laboratories is currently trading for an adjusted price-to-earnings ratio of 22. This number uses adjusted earnings, not GAAP earnings. The company’s adjusted earnings do not include amortization expense and other items. The adjusted earnings give a more accurate picture of Abbott Laboratories’ true earnings power.

Abbott Laboratories appears to be trading at the high end of fair value. The company’s price-to-earnings ratio is fairly high, but reflects the extreme quality of Abbott Laboratories.

The company is still growing quickly, has low debt, a shareholder friendly management, and is recession resistant. Investors should expect to pay a slight premium over the S&P 500’s price-to-earnings multiple for a premium quality business like Abbott Laboratories.

Final Thoughts

The management teams at many publicly traded corporations talk and talkabout taking advantage of emerging market growth. Abbott Laboratories’ management has done much more than talk. They have positioned the company for international growth.

Over the past year, this strategy has looked somewhat foolish thanks to the rapidly appreciation United States dollar. In the long run, emerging market growth will outpace growth in the United States. Emerging markets simply have an easier path to growth and larger populations.

Abbott Laboratories has a long growth runway ahead in emerging markets. The company’s shares appear to be trading near the high end of fair value. The company’s stock price is up over 20% in the last year despite the strong dollar. When the dollar trend reverses, Abbott Laboratories will likely see rapid earnings-per-share growth.

Abbott Laboratories is among the highest quality dividend growth stocks in the health care industry. The health care industry itself is among the best industries to invest; people will always need health care. Long-term thinking dividend growth investors would do well to make Abbott a core holding of their portfolio.