Abbott Plans to Spin Off Nutrition Business as Legal Woes Mount
Bengaluru: Abbott Laboratories cut its 2026 sales growth forecast on Wednesday and said it plans to separate its nutrition business into a publicly traded company, amid costly litigation over its baby formula products.
The separation will shed a beleaguered unit behind brands such as Similac infant formula and Ensure nutritional drinks, which generated more than $8 billion in sales last year.
Abbott joins peers, including Johnson & Johnson and Medtronic, that have also announced business separations in recent years, as large healthcare companies reshape portfolios to sharpen focus on higher-growth segments.
The nutrition division lost a major US government supply contract last year and faced higher manufacturing costs that prompted price increases and hurt demand.
The baby formula business has faced a series of setbacks since a 2022 recall and shutdown of Abbott's Sturgis, Michigan, plant that exacerbated a nationwide shortage. The company also faced lawsuits alleging its specialized formula for premature infants caused a potentially fatal bowel disease.
CEO Robert Ford struck an upbeat tone on a post-earnings call, and said outstanding legal disputes were unlikely to delay the separation. "Strategically, over the next decade, there's going to be a lot of segments in this nutrition business ... that are going to be very differentiated and kind of high growth."
The company expects the separation to be complete in 2027.
Abbott shares fell 4% in morning trading. The slip was likely due to the "potential for nutrition value creation partially offsetting the moderated underlying business fundamentals," J.P.Morgan analyst Robbie Marcus said.
REDUCED FORECAST WEIGHS ON 2027
Abbott now expects 2026 sales growth of about 6%, down from its prior expectation of 6.5% to 7.5%. It tightened its full-year adjusted profit per share forecast range to $5.50 to $5.55 from $5.45 to $5.60.
This was unfavorable to the extent of affecting the company's 2027 trajectory, RBC Capital Markets analyst Au Kendall said.
Third-quarter adjusted profit of $1.42 per share was in line with estimates. Revenue came in at $13.01 billion. Analysts on average estimated $13 billion, according to data compiled by LSEG.
