Abbott Laboratories (NYSE:ABT)

Current Income Tax Expense

The current tax expense exhibited an overall upward trend from 2020 to 2022, increasing significantly from $605 million to $2,032 million. This was followed by a decline to $1,402 million in 2023. In 2024, the current tax expense saw a moderate increase, rising to $1,572 million.

Deferred Income Tax Expense

The deferred tax expense displayed a negative value throughout the periods, indicating deferred tax benefits or credits. This figure decreased in magnitude from -$108 million in 2020, reaching a more substantial negative value of -$659 million in 2022. In 2023, the magnitude of the deferred tax reduced to -$461 million before sharply increasing in magnitude to -$7,961 million in 2024, which is an exceptional deviation from prior years.

Taxes on Earnings from Continuing Operations

Taxes on earnings from continuing operations generally followed a similar pattern to the current tax expense, initially increasing from $497 million in 2020 to $1,373 million in 2022, then decreasing to $941 million in 2023. However, in 2024, there was a pronounced reversal, with this figure becoming negative at -$6,389 million. This sharp decline reflects the significant impact of the deferred tax expense change observed in the same year.

Overall Observations

The data indicate normal growth and fluctuations in current income tax expenses up to 2023, followed by notable volatility in deferred tax components and total taxes on earnings in 2024. The substantial negative deferred tax adjustment in 2024 suggests an extraordinary event or adjustment, which dramatically affected the total tax expense, resulting in a tax benefit rather than an expense. This anomaly warrants further investigation to ascertain the underlying causes, such as changes in tax laws, significant one-time tax credits, or revaluation of deferred tax assets or liabilities.

The analysis of the financial tax rate components over the five-year period reveals several notable trends and significant variations, particularly in the last year.

Statutory tax rate on earnings from continuing operations

The statutory tax rate remained constant at 21% throughout the period, indicating no changes in the basic corporate tax rate applied to earnings.

Impact of foreign operations

This factor consistently reduced the tax rate, with a range between -3.9% and -1.8%. The negative impact fluctuated without a clear directional trend but showed a lessening effect in the final year, moving from -3.6% to -1.8%.

Foreign-derived intangible income benefit

This benefit increased in magnitude over the years, deepening from -1% in 2020 to -2.3% in 2024, reflecting growing tax advantages related to intangible income from foreign operations.

Valuation allowance adjustments

A new significant tax adjustment appeared in 2024, with an extraordinary negative adjustment of -107.1%, which heavily influenced the overall tax rate for that year.

Domestic impairment loss

This adjustment was observed only in the first two years at small negative percentages (-2.7% and -0.1%), and was absent thereafter.

Excess tax benefits related to stock compensation

These benefits showed a decreasing trend in absolute value, moving from -1.9% in 2020 to smaller negative amounts around -0.3% to -0.7% in subsequent years.

Research tax credit

This credit remained relatively stable, fluctuating slightly between -1.1% and -0.6%, suggesting consistent utilization of research-related tax incentives.

Resolution of certain tax positions pertaining to prior years

This factor showed a notable upward trend, starting with negative impacts in the initial years (-2.8% and -0.7%) and transitioning to a positive influence by 2022 to 2024, with values up to 1.2% before declining slightly to 0.4% in the final year.

Intercompany restructurings and integration

This component had fluctuating effects, starting with slight positive impacts in 2020 and 2021, a missing value in 2022, a significant negative adjustment in 2023 (-1.4%), and a small positive adjustment again in 2024 (0.2%).

State taxes, net of federal benefit

This impact remained fairly stable and positive but modest across all periods, diminishing slightly from 0.5% in early years to 0.3% in 2024.

All other, net

This component mostly had minimal effects, with small positive impacts initially and a slight negative impact (-0.1%) in the last year.

Effective tax rate on earnings from continuing operations, before impact of TCJA and other related items

This rate increased from 9.5% in 2020, peaked at 16.5% in 2022, then decreased to 14.1% in 2023 before plummeting to an anomalous -91.1% in 2024, largely driven by the valuation allowance adjustment and other unusual items.

Impact of TCJA and other related items

This item was only reported in 2020 at 0.5% and was absent in the following years, indicating that the impact of tax reforms was either negligible or reclassified.

Effective tax rate on earnings from continuing operations

The effective tax rate followed the same pattern as the pre-TCJA rate, reflecting consistency between reported and adjusted figures until the marked negative disruption in 2024, aligning exactly with the -91.1% rate due to extraordinary tax adjustments.

Overall, the financial tax data shows consistent application of statutory rates with various adjustments related to foreign operations, tax credits, and restructuring activities. The substantial negative tax rate in 2024, highlighted by the valuation allowance adjustment, indicates a significant one-time effect that diverges sharply from previous years' patterns and warrants further investigation for its implications on the company’s tax strategy and financial health.

Compensation and employee benefits

There is a pronounced decline from 1003 million US$ in 2020 to 89 million US$ in 2023, with an unusual negative value of -276 million US$ reported in 2024, suggesting possible adjustments or reversals in that year.

Trade receivable reserves

These reserves show a gradual increase over the period from 196 million US$ in 2020 to 230 million US$ in 2024, indicating a consistent rise in anticipated uncollectible accounts receivable.

Research and development costs

R&D expenditures were absent in the earliest years but emerge significantly from 319 million US$ in 2022, rising steadily to 773 million US$ in 2024, reflecting increased investment in innovation and development activities.

Inventory reserves

Inventory reserves display an upward trend from 146 million US$ in 2020 to a peak of 198 million US$ in 2023, followed by a decrease to 168 million US$ in 2024.

Lease liabilities

Lease liabilities remain relatively stable, fluctuating slightly around the 260 million US$ mark throughout the period, indicating consistent leasing obligations.

Deferred intercompany profit

There is a gradual increase in deferred intercompany profit from 254 million US$ in 2020 to 284 million US$ in 2024, suggesting growing amounts of profit deferred on intercompany transactions.

NOLs, reserves not currently deductible, credit carryforwards, and other

This category experiences substantial growth from approximately 2,383 million US$ in 2020 to over 10,353 million US$ in 2024, indicating significant accumulation of tax loss carryforwards and related tax assets.

Deferred tax assets before valuation allowance

Deferred tax assets before allowance decrease slightly from 4,241 million US$ in 2020 to 3,888 million US$ in 2022 but then show a marked increase to 12,073 million US$ in 2024. This reflects a significant recognition of tax assets in recent years.

Valuation allowance

The valuation allowance, a contra account to deferred tax assets, initially remains around -1,060 million US$ to -1,180 million US$ in early years but spikes to -8,690 million US$ in 2023 before declining in 2024 to -1,664 million US$. This pattern suggests substantial changes in the assessment of realizability of deferred tax assets, with a notable allowance buildup in 2023 followed by partial reversal.

Deferred tax assets

Net deferred tax assets increase modestly from 3,181 million US$ in 2020 to 2,863 million US$ in 2023 but then surge to 10,409 million US$ in 2024, consistent with changes in valuation allowance and underlying deferred tax elements.

Depreciation

Depreciation expenses increase steadily from -297 million US$ in 2020 to a peak of -414 million US$ in 2023, then slightly decrease to -408 million US$ in 2024. This suggests growing asset base or capital expenditures during the period.

Right of Use lease assets

These assets remain relatively steady around negative 250 million US$, reflecting consistent leasing asset balances.

Other, primarily the excess of book basis over tax basis of intangible assets

This amount shows a consistent decline in the negative balance from -2,876 million US$ in 2020 to -1,365 million US$ in 2024, indicating a reduction in temporary differences related to intangible assets.

Deferred tax liabilities

Deferred tax liabilities decline steadily from -3,424 million US$ in 2020 to -2,298 million US$ in 2024, signifying decreasing future tax obligations.

Net deferred tax assets (liabilities)

The net deferred tax position shifts from a negative balance of -243 million US$ in 2020 to a positive and significantly improved balance of 8,111 million US$ in 2024. This reflects material changes in the deferred tax balances, likely driven by the increase in deferred tax assets and revaluation of valuation allowances.

Deferred Tax Assets

The deferred tax assets show a generally stable level from 2020 through 2023, fluctuating modestly between approximately 982 million and 1206 million US dollars. However, there is a substantial increase in 2024, where the amount rises sharply to 8623 million US dollars. This dramatic growth after a relatively stable period suggests a significant change in the company's tax planning, timing differences, or recognition of future tax benefits.

Deferred Tax Liabilities

The deferred tax liabilities exhibit a declining trend over the five-year period. Starting from 1406 million US dollars in 2020, the liabilities consistently decrease each year to 512 million US dollars in 2024. This steady reduction indicates a possible decrease in taxable temporary differences or changes in the company’s asset base or tax positions that reduce future tax obligations.

Overall Comparison

While deferred tax liabilities steadily decline, deferred tax assets remain relatively stable until 2023 before exhibiting a pronounced increase in 2024. The divergence in these trends may imply a shift in deferred tax balances influenced by strategic tax management, changes in legislation, or operational activities impacting timing differences. The sharp rise in deferred tax assets, coupled with continued decline in liabilities, could reflect improved future tax benefit realizations or adjustments in accounting estimates.

Total Assets

The reported total assets exhibit a generally stable pattern from 2020 to 2023, ranging from approximately 72.5 billion to 75.2 billion USD, followed by a notable increase in 2024 to about 81.4 billion USD. Adjusted total assets show a similar trend but with more moderate fluctuations, increasing slightly from approximately 71.4 billion USD in 2020 to around 72.8 billion USD in 2024, indicating some smoothing adjustments related to deferred income taxes.

Total Liabilities

Both reported and adjusted total liabilities demonstrate a consistent downward trend over the five-year period. Reported liabilities decreased from about 39.5 billion USD in 2020 to roughly 33.5 billion USD in 2024. Adjusted liabilities follow a comparable trend but are slightly lower in magnitude, falling from around 38.1 billion USD to 33.0 billion USD by 2024. This decline suggests progressive debt reduction or liability management throughout the period.

Shareholders’ Investment

Reported shareholders’ investment shows a steady increase from approximately 32.8 billion USD in 2020 to 38.6 billion USD in 2023, followed by a significant jump to about 47.7 billion USD in 2024. Adjusted shareholders’ investment reflects a similar rising trajectory but with somewhat smaller increments, climbing from around 33.0 billion USD in 2020 to 39.6 billion USD in 2024. The marked increase in 2024 reported figures may indicate a substantial capital injection, retained earnings accumulation, or revaluation impacts.

Net Earnings

Reported net earnings exhibit volatility, with a rise from approximately 4.5 billion USD in 2020 to a peak of 7.1 billion USD in 2021, followed by a gradual decline to about 5.7 billion USD in 2023, and then a sharp increase to an estimated 13.4 billion USD in 2024. Adjusted net earnings mirror the overall direction but with less pronounced peaks and troughs, moving from roughly 4.4 billion USD in 2020 to around 5.4 billion USD in 2024. The significant spike in reported net earnings in 2024, not fully captured by adjusted figures, may be influenced by tax-related accounting adjustments or one-time items.

Overall Insights

The data suggest effective management of liabilities alongside steady growth in shareholders’ equity over the analyzed period. The divergence between reported and adjusted figures—particularly in 2024—implies that deferred income tax and other non-cash accounting adjustments have a notable impact on the financial presentation. The fluctuations in net earnings emphasize variability in operational performance or recognition of tax effects, which is critical for assessing the company’s underlying profitability.

Net Profit Margin Trends

The reported net profit margin exhibits a generally positive trend, increasing significantly from 12.99% in 2020 to a peak of 31.95% in 2024, despite minor fluctuations in the intermediate years. In contrast, the adjusted net profit margin shows a gradual decline, falling from 12.68% in 2020 to 12.97% in 2024, representing a relatively stable but slightly decreasing profitability when adjustments are considered.

Total Asset Turnover Trends

Both reported and adjusted total asset turnover ratios exhibit generally stable performance with minor variations. Reported turnover increased from 0.48 in 2020 to a peak of 0.59 in 2022, before declining slightly to 0.52 in 2024. Adjusted turnover shows a similar pattern but ends with a slight increase to 0.58 in 2024, suggesting consistently efficient use of assets, especially under adjusted conditions.

Financial Leverage Trends

Financial leverage has consistently decreased over the period under both reported and adjusted metrics. Reported leverage declined from 2.21 in 2020 to 1.71 in 2024, while the adjusted leverage fell from 2.16 to 1.84 in the same timeframe. This indicates a trend toward reduced reliance on debt financing and potentially lower financial risk.

Return on Equity (ROE) Trends

The reported ROE shows considerable volatility, with an increase from 13.71% in 2020 to 19.75% in 2021, followed by a decline to 14.83% in 2023 and a renewed surge to 28.12% in 2024. The adjusted ROE, however, follows a declining trend overall, dropping from 13.28% in 2020 to 13.76% in 2024, with intermediate decreases indicating reduced shareholder returns after tax and other adjustments.

Return on Assets (ROA) Trends

The reported ROA follows a pattern paralleling the reported profit margin, rising from 6.20% in 2020 to 16.46% in 2024 but after peaking in 2021 and 2022 with a notable dip in 2023. The adjusted ROA demonstrates a steady decline from 6.15% in 2020 down to 7.47% in 2024, reflecting stable but subdued asset profitability on an adjusted basis.

Overall Insights

The disparities between reported and adjusted figures suggest significant impacts of tax and potential other adjustments on profitability metrics. Reported data reveals strong improvements mainly in profit margins, ROE, and ROA in the final year, implying exceptional financial performance potentially influenced by one-time or non-recurring factors. Conversely, adjusted metrics portray a more conservative and stable financial condition with slight declines or stable trends in key ratios. The reduction in financial leverage under both measures indicates a strategic move toward lower debt exposure and enhanced financial stability. Asset turnover remains relatively constant, suggesting consistent operational efficiency.

Reported Net Earnings

The reported net earnings exhibit significant variability over the analyzed years. From 2020 to 2021, there is a notable increase from 4,495 million US dollars to 7,071 million US dollars, reflecting strong earnings growth. The earnings slightly declined in 2022 to 6,933 million US dollars and experienced a more pronounced drop in 2023 to 5,723 million US dollars. However, a substantial rebound occurs in 2024, with reported net earnings nearly doubling to 13,402 million US dollars, indicating an exceptional improvement relative to prior years.

Adjusted Net Earnings

Adjusted net earnings display a more stable pattern when compared to reported earnings. After an increase from 4,387 million US dollars in 2020 to 6,562 million US dollars in 2021, adjusted earnings progressively decline over the next three years, reaching 5,441 million US dollars in 2024. This steady decrease contrasts with the volatility observed in reported earnings, suggesting that the adjustments remove certain extraordinary items influencing fluctuations.

Reported Net Profit Margin

The reported net profit margin follows a trend similar to reported net earnings. It rises from 12.99% in 2020 to a peak of 16.42% in 2021. Thereafter, it gradually declines to 14.27% by 2023 before experiencing a sharp increase to 31.95% in 2024. This sharp increase in 2024 reflects an unusually high profitability on reported basis, likely affected by significant items in that fiscal year.

Adjusted Net Profit Margin

Adjusted net profit margin shows a consistent declining trend over the period. Starting at 12.68% in 2020, it peaks modestly at 15.23% in 2021 and then steadily falls to 12.97% by 2024. The narrower margin fluctuations compared to the reported margin suggest that adjustments smooth out the earnings volatility and present a more conservative profitability measure.

Overall Insights

The comparison between reported and adjusted financial data indicates that reported figures include significant items influencing net earnings and profit margins, particularly in 2024. The reported data show greater volatility and a marked spike in 2024, suggesting the presence of exceptional events or accounting items impacting reported earnings. In contrast, the adjusted numbers portray a more stable earnings performance with a gradual decline in profitability margins over the reviewed period. This divergence underscores the importance of considering adjusted results for understanding the company’s underlying operational profitability trends.

Total Assets

The reported total assets demonstrate a fluctuating trend over the five-year period. Starting at 72,548 million USD in 2020, assets increased to 75,196 million USD in 2021, followed by a slight decrease in 2022 and 2023, reaching 73,214 million USD. In 2024, there was a significant increase to 81,414 million USD. The adjusted total assets followed a similar pattern, with values slightly lower than reported totals each year, indicating consistent adjustments. The adjusted assets rose from 71,385 million USD in 2020 to a peak near 74,000 million USD in 2021, then marginally declined through 2023, ending at 72,232 million USD, and comparatively leveling off at 72,791 million USD in 2024.

Total Asset Turnover Ratios

The reported total asset turnover ratio shows improvement from 0.48 in 2020 to a peak of 0.59 in 2022, suggesting enhanced efficiency in utilizing assets to generate revenue during this period. This ratio then decreased to 0.55 in 2023 and further to 0.52 in 2024, indicating a slight decline in asset utilization efficiency in the most recent years. Conversely, the adjusted total asset turnover ratio mirrors the reported trend but starts marginally higher in 2021 and maintains a more stable performance through 2024, ending at 0.58—higher than the reported ratio for 2024. This suggests that when adjustments are considered, the asset utilization efficiency appears somewhat better, particularly in the latest year.

Overall Insights

Over the examined timeframe, total assets experienced moderate variability with a notable increase in 2024 in reported figures, while adjusted assets remained relatively stable towards the end. The upward trend in asset turnover ratios until 2022 signals improved asset efficiency, but the subsequent decline in reported ratios points to emerging challenges or changing operational circumstances. Adjusted turnover ratios suggest a more favorable view of asset utilization in recent years, highlighting the potential impact of accounting adjustments on financial analysis. The combined data implies that while asset base growth has been uneven, the company has generally improved its asset productivity until a recent slight decline, with adjusted figures indicating a steadier operational performance.

The financial data over the five-year period reveals several notable trends in Abbott Laboratories' asset base, shareholders’ investment, and financial leverage, both in reported and adjusted terms.

Total Assets

The reported total assets demonstrate a generally stable to mildly increasing trend with a peak in 2024 at US$81,414 million, following a slight decline between 2021 and 2023. Adjusted total assets similarly show a mild decreasing trend from 2021 to 2023, followed by stabilization around US$72,791 million in 2024, which is significantly lower than the reported figure, indicating some adjustments had a reducing effect on the asset base.

Shareholders’ Investment

The reported total Abbott shareholders’ investment increases consistently year over year, rising sharply in 2024 to US$47,664 million from US$38,603 million the previous year. The adjusted shareholders’ investment also shows steady growth but at a somewhat slower pace, culminating at US$39,553 million in 2024. The divergence in the 2024 figures suggests that some adjustments significantly affected equity valuation that year.

Financial Leverage

Financial leverage, measured as a ratio, shows a clear downward trend, indicating a steady reduction in the company’s reliance on debt relative to shareholders’ equity. The reported leverage ratio decreases from 2.21 in 2020 to 1.71 in 2024. The adjusted leverage ratio declines as well but remains slightly higher than the reported figure in 2024 at 1.84, suggesting that deferred or adjusted tax effects have maintained somewhat higher relative debt levels than reported.

Overall, the data suggest that the company has been gradually strengthening its equity base, resulting in lower financial leverage, which could indicate an improved risk profile and financial stability. The adjustments for deferred income taxes slightly modify the total assets and equity figures but retain the overall directional trends seen in the reported data.

The financial data demonstrates several notable trends in both reported and adjusted figures over the five-year period.

Net Earnings

Reported net earnings exhibit significant fluctuation, starting at 4,495 million USD in 2020 and rising sharply to 7,071 million USD by 2021. This growth slightly declines in 2022 and continues to decrease to 5,723 million USD in 2023, followed by a substantial increase to 13,402 million USD in 2024. Adjusted net earnings follow a similar overall pattern but show a more moderate increase, rising from 4,387 million USD in 2020 to 6,562 million USD in 2021, then gradually declining to 5,262 million USD in 2023 with a modest gain to 5,441 million USD in 2024.

Total Shareholders’ Investment

The reported total shareholders’ investment shows a steady upward trajectory, moving from 32,784 million USD in 2020 to 47,664 million USD in 2024. Adjusted shareholders’ investment similarly increases but at a more restrained pace, climbing from 33,027 million USD in 2020 to 39,553 million USD in 2024. The smaller differential between reported and adjusted investments suggests modest adjustments affecting shareholders’ equity.

Return on Equity (ROE)

The reported ROE indicates substantial volatility, starting at 13.71% in 2020, rising sharply to 19.75% in 2021, and remaining relatively high at 18.9% in 2022. It then declines to 14.83% in 2023 before peaking dramatically at 28.12% in 2024. In contrast, adjusted ROE reflects a more stable and consistent trend, starting at 13.28% in 2020 and gradually increasing to 18.23% in 2021, then slightly declining to 17.13% in 2022 and remaining near this level through 2023 and 2024 at approximately 13.78% and 13.76%, respectively.

Overall, the reported earnings and ROE figures highlight considerable volatility, likely influenced by one-time or non-recurring events impacting reported results. The adjusted figures, accounting for such items, present a more stable but moderate growth pattern, emphasizing consistent operational performance. The divergence between reported and adjusted ROE, particularly the sharp rise in the reported measure in 2024, warrants further investigation to understand the underlying causes. Shareholders’ investment values steadily increase across both measures, indicating ongoing growth in equity capitalization.

Net Earnings

Reported net earnings exhibit a generally increasing trend over the five-year period, rising sharply from 4,495 million USD in 2020 to 13,402 million USD in 2024. This growth, however, includes a notable peak in 2021 at 7,071 million USD, followed by a slight decline in 2022 and 2023 before the significant surge in 2024. Adjusted net earnings follow a similar upward trajectory initially, increasing from 4,387 million USD in 2020 to 6,562 million USD in 2021. Subsequently, adjusted earnings decrease steadily through 2024, reaching 5,441 million USD, indicating that adjustment factors have a dampening effect on underlying profitability in the later years compared to reported figures.

Total Assets

Reported total assets show a relatively stable pattern between 2020 and 2023, fluctuating narrowly around the mid-70,000 million USD range, with a decline observed in 2023 to 73,214 million USD. In 2024, assets increase noticeably to 81,414 million USD. Adjusted total assets mirror this stability with minor decreases over time, ending at 72,791 million USD in 2024, which contrasts with the reported figure’s growth in the final year. The divergence in 2024 suggests that asset adjustments reduce the recognized asset base relative to reported values.

Return on Assets (ROA)

Reported ROA demonstrates strong variability, starting at 6.2% in 2020 and climbing to a peak of 9.4% in 2021. It then experiences a gradual decline through 2023 before surging dramatically to 16.46% in 2024. Conversely, adjusted ROA shows a more muted and consistent pattern, rising from 6.15% to 8.87% in 2021, then declining incrementally to 7.28% in 2023, and only slightly increasing to 7.47% in 2024. The considerable disparity between reported and adjusted ROA in 2024 points to amplified effects of adjustments on profitability metrics in that year.

General Observations

The analysis reveals that reported financial metrics tend to display more pronounced volatility and larger gains in the latest period compared to adjusted metrics. Adjusted figures provide a more conservative and stable view, moderating peaks seen in reported data. Particularly in 2024, the divergence between reported and adjusted net earnings and ROA suggests there may be significant one-time or unusual items influencing the reported results. The relative stability in adjusted total assets over time, contrasted with the spike in reported assets in 2024, warrants further investigation into asset valuation or recognition policies during this period.