Profitability of Abbott Laboratories

My company is Abbott Laboratories and the latest annual reports are from the previous year of 2011.  I downloaded the consolidated statement of earnings directly from the companies website.  The statistics in the statement are shown in dollars and shares in thousands except per share data. According to the statement net sales have increased to $38,851,259 which is an increase of $3,684538 from the previous year of 2010, this is indicative to the scope of the business if they are able to generate that much net sales, however that alone is not indicative of whether or not they are the most recommended to invest in due to the remaining question of net profit.  It is shown that the net earnings have increased from $4,626,172 in 2010 to $4,728,449 in 2011 to equate to an increase of $102,277. This in turn raises the basic earnings per common share from $2.98 in 2010 to $3.03 in 2011 by an average of 1.7%. Although these statistics look promising they alone do not build a sufficient case to the possible investment in Abbott Laboratories. Does the information provided regarding their profitability ensure maximum return for the investor? Are the costs being managed efficiently to provide maximum profitability?  It should also be noted that although in the past years the profitability has increased it is still a decline considering the $5,745,838 in profit in 2009. However, taking external factors into account such as the business cycle that would explain the decline in profits to a certain extent. However, it would be recommended that the investors make themselves acquainted with the company’s survival strategies during a negative external business environment before investing. A major industry trend is research and development and it is seen that Abbott has spent $4,129,414 in 2011, which is an increase of  $404,990 from 2010. This partially explains the costs of the business and why it has not reached maximum profitability, however it if executed correctly could have a positive impact on profits. Therefore it is recommended to the investors to ask to view the research and development strategy of Abbott Laboratories. Although research and development only increased costs by $4,129,414 the total operating costs rose by $4,020,171 in the past year. This indicates that cost of products sold increased and it is recommended to the investors to view the production strategy to reduce costs, or for Abbott Laboratories to change there production process. Administrative costs are also high which indicate a wastefulness of resources, so this should be further investigated by Abbott Laboratories and the solution should be presented to the investors to ensure them of the companies vision. A possible solution would be to begin to transform the company into an environment friendly company as it has been shown to show a reduction in overall costs over time that should ensure that the investors receive a return on their investment. The issues discussed should be further investigated, yet Abbott Laboratories still appears to be a viable candidate for future investment.

Resources:

Abbott Laboratories. (2011). Consolidated Statement of Earnings. As retrieved from:

http://abbott.com/static/content/microsite/annual_report/2011/01_earnings_statement.php