Abbott Labs 3Q15 Earnings Call notes

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Policy still driving growth in em

“National policies focused on expanding access to care and favorable trends, including increasing birth rates, aging populations and adoption of Western standards and technologies are all driving growth.”

Exuberance in healthcare m&A died down in mid summer

“I’d describe a little bit of macro environment. I’d call it exuberance of activity in this space, meaning healthcare in particular, pharmaceuticals, et cetera. It clearly came to a halt, I’d say, mid-summer. And it doesn’t reflect that there aren’t the same opportunities or the opportunities that we’ve been interested in, but activity slowed. I’d say we didn’t miss anything. We’re still absolutely as active as we wanted to be. I might like to have gotten more done too, but I think sometimes these things take time.””

There’s been a slowing but not much change in valuation expectation

“in general, I think there’s been a slowing, but not so much a change in valuation expectations in some of the businesses out there. We’re still every bit as active and interested.”

Healthcare spend hasn’t slowed as much in China

“I think there’s been a lot of concern about the slowing of various emerging markets, in particular China. And while the overall economies in some of these markets have slowed, it hasn’t been the same in healthcare, and it hasn’t been the same in the businesses we’re in. ”

Try not to rely on topline to drive margin expansion

“We have not been dependent on price to get it. In fact, we’ve been very careful not to rely on that. I think when you rely on price, you don’t get at the underlying fundamentals of how you operate your business. ”

Look for strategic fit first in an acquisition

“So I look at strategic fit first. We’re not financial engineering our growth. We’re not looking to be a rollup that’s got to go find a few more opportunities every year to overcome last year. We’re looking for fundamentals that drive growth and expansion in markets and there’s a lot of healthcare expansion around the world that fits us beautifully and a lot of opportunity for us access. So our primary focus is on businesses that relate to what we’re already in or doing.”

You have to be right about what a business is going to do to succeed at M&A in this environment

“I think we’ve been pretty disciplined dealmakers, hence probably one of the reasons that we haven’t seen as much activity out of us as we wanted to. You can make a lot of deals out there if you have no limit on what you want to pay. And I think in this environment, you got to put the right value on businesses and that means that your forecast about what a business is going to do in the near to long term really matters, and there’s a lot of ways to do deal models to convince yourself that what you’re doing is a fundamentally good return. But let’s face it, at the end of the day, we’re investing our shareholders’ money”

Hedges eventually roll off

“let me generally answer in the following way. Depending on how you hedge, if you hedge your currencies at all, it’s good for one year. It’s not necessarily so great the following year as your hedges expire and so on. ”

We’re not currency traders

“you can be opportunistic, but at the end of the day, we’re not currency traders and we’re not trying to make money necessarily on currency. That’s not our business.”

The best hedge is to have costs in the same place as revenue

“our best natural hedge to exchange is having our costs in the same places where we earn our profits. “