Abbott Laboratories’ best segment just got even better: Is the stock a buy?

In recent years, Abbott Laboratories‘ (ABT -0.37%) business has been a bit of a roller coaster. The pandemic disrupted its medical device business, but it later managed to mitigate those losses by rapidly developing and commercializing COVID-19 diagnostic tests. However, sales of these products began to decline as the outbreak subsided, leading to more uneven revenue growth for the company. Through it all, one of Abbott Laboratories’ segments has been the best and most consistent driver of growth: diabetes care.

Abbott Labs recently added a new product to this business that could help improve its performance. Let’s dig into the details and find out what this all means for investors.

The leader in continuous blood glucose monitoring

Abbott Labs’ key product line in its diabetes care segment is FreeStyle Libre, a portfolio of continuous glucose monitoring (CGM) devices that allow diabetes patients to keep track of their blood glucose levels. Free sales caught fire. They generally increase the company’s average revenue growth. In the second quarter, Abbott Laboratories’ sales rose 4% year over year to $10.4 billion. The company’s top line grew organically by 9.3% if we exclude the effect of its coronavirus diagnostics segment.

But even that pales in comparison to FreeStyle Libre, whose $1.6 billion in sales was up 20.4% organically from the year-ago period. Abbott Labs is the leader in the CGM market, serving approximately 6 million patients with its products. However, patients can purchase FreeStyle Libre devices only with a prescription, at least in the US (not in other countries.)

In June, Abbott Laboratories announced that the US Food and Drug Administration (FDA) had approved Libre Rio, a new over-the-counter (OTC) CGM option for patients with type 2 diabetes who do not use insulin (FreeStyle Libre targets insulin) . and non-insulin users). A simpler, more targeted option like Libre Rio could appeal to non-insulin diabetic patients who were on the fence.

Abbott Labs went even further. It also won FDA clearance for Lingo, an OTC CGM option for those without diabetes. They too can benefit from tracking their blood glucose levels. Lingo is built on the platform that powered the highly successful FreeStyle Libre franchise. According to management, Lingo and Libre Rio are part of Abbott Laboratories’ plan to grow this portfolio to $10 billion in annual sales by 2028.

So far this year, Libre sales are around $3 billion, which translates to an annual run rate of $6 billion. So the expanding Libre franchise should remain an important growth driver for Abbott Labs.

Beyond 2028

The opportunity in the CGM market is vast and should enable Abbott Labs to perform well beyond 2028. As the company pointed out earlier this year, there are half a billion adults with diabetes worldwide, and only 1% of them have access at CGM. technology. One reason for this low penetration rate is that many of these patients live in countries where CGM leaders, including Abbott Labs, have smaller footprints. However, even in countries where Abbott has a larger presence, particularly the US, OTC access to CGM devices could help significantly increase their use.

Abbott Laboratories’ long-term plan is to make inroads into this massive market by launching products tailored to different regions. Abbott is not just a diabetes company. The company’s portfolio boasts dozens of products in several therapeutic areas. Abbott Labs has a long and successful track record of innovation, significant experience navigating the healthcare industry, and has generally produced excellent returns for long-term investors. The company still has the tools to offer all of these benefits to those entering today.

Let’s not forget Abbott Laboratories’ impressive streak of 52 consecutive annual dividend increases, which also makes it a top buy-and-hold stock for dividend investors — arguably one of the best on the market . There are lots of reasons to invest in stocks.