Abbott Labs' Earnings Predictability Attracts Legions of Investors but a Few Skeptics, Too
NEW YORK -- If you knew -- just knew -- that a company would post a 15% earnings gain every year, how much would you pay for the stock?</br></br>In the case of Abbott Laboratories, many investors are behaving as if that wasn't a hypothetical question. Based in North Chicago, Ill., Abbott makes medical diagnostic equipment, hospital supplies, drugs and infant formula. Its profit has increased each year since 1971, almost always in the vicinity of 15%.</br></br>Earnings predictability has made Abbott a favorite on Wall Street. At least 10 brokerage houses recommend it in glowing terms. The stock has marched from below 50 early this year to Friday's close of 70, up 3/4. Abbott shares sell for 19 times the past 12 months' earnings -- a multiple that suggests investors think nothing can go wrong.</br></br>But there's a difference between a great company and a great stock, a few skeptics say. If investors expect earnings to rise 15% forever, they say, disappointments are more likely than pleasant surprises.</br></br>The stock's legion of fans don't seem to be expecting any surprises, period. "They never really have any earnings disappointments," says Jim Fenger, an analyst with Kemper Financial Services in Chicago.