Abbott Laboratories lowered its full-year 2026 sales growth forecast on Wednesday and announced plans to spin off its nutrition business, home to Similac and Ensure, into a separate publicly traded company by the end of 2027.
The healthcare giant revealed the major corporate restructuring alongside its third-quarter financial results. Management revised its full-year comparable sales growth forecast downward to approximately 6%, falling from the prior target range of 6.5% to 7.5%. Shares of Abbott Laboratories fell 4% in premarket trading on October 21.
Third-Quarter Revenue Misses and Guidance Adjustments
While third-quarter headline figures met Wall Street expectations in certain divisions, specific core segments lagged behind consensus estimates. Total revenue for the third quarter came in at $13.01 billion, matching the average analyst estimate of $13 billion compiled by LSEG. The company reported a quarterly adjusted profit per share of $1.42, which was in line with forecasts.
However, third-quarter sales in the medical devices segment grew 6.9% to $5.83 billion, missing estimates of $5.88 billion due to weaker-than-expected sales for heart devices. To account for these pressures, Abbott tightened its full-year adjusted profit per share forecast to a range of $5.50 to $5.55, shifting from its previous view of $5.45 to $5.60.
Spinning Off Similac, Ensure, and the Nutrition Division
The planned spinoff will carve out the nutrition unit into an independent publicly traded entity with annual sales of about $8.5 billion. The still-unnamed company will house recognizable global brands, including Similac, Pedialyte, PediaSure, Glucerna, and Ensure. Daniel Salvadori, group president of established pharmaceuticals and nutritional products at Abbott, will lead the new firm as chief executive officer. Having been with Abbott Laboratories since 2014, Salvadori has held multiple roles throughout his time at the organization, such as executive vice president of nutritional products and senior vice president of established pharmaceuticals for Latin America.
This separation will benefit both companies, setting each one up for maximum success in its respective market.
Robert B. Ford, Chairman and CEO of Abbott Laboratories
Ford added that the nutrition business possesses a unique opportunity to capitalize on growing demand for healthy nutrition and will be better positioned as an independent company to direct strategic resources. The transaction will utilize a tax-free share distribution plan, issuing shares of the new nutrition company to current shareholders. The separation is scheduled for completion by the end of 2027.
Weighing Stagnant Growth Against Historic Liabilities
The nutrition division has experienced years of sluggish momentum. Across the first nine months, comparable sales for the nutrition unit dropped 2.1% while U.S. sales declined 4.5%, leaving it as Abbott’s sole contracting segment, though the third quarter showed improvement with 4.9% comparable growth. Revenue reached $8.45 billion in 2025, showing virtually no change from the $8.29 billion recorded in 2021. Sales plummeted to $7.46 billion in 2022 following the recall and shutdown of Abbott’s baby formula plant in Sturgis, Michigan, which intensified a nationwide shortage. The unit subsequently lost a major U.S. government supply contract and absorbed higher manufacturing costs that forced price increases and dampened demand.
Beyond operational hurdles, the division carries legal baggage. The healthcare company has engaged in years of litigation over its management of the formula facility, where deadly bacteria was suspected of causing infant deaths, resulting in several multimillion-dollar settlements. The adjusted earnings per share for the third quarter left out roughly $670 million designated to settle the Gill lawsuit along with necrotizing enterocolitis (NEC) claims concerning approximately 2,000 additional infants.
What Remains Behind in the Core Healthcare Portfolio
Abbott joins Johnson & Johnson in planning a major business separation for 2027 as large healthcare enterprises trim underperforming portfolios to prioritize higher-growth segments.
Market reaction to the announcement was immediate, with shares falling more than 4% before the bell on October 21. According to J.P.Morgan analyst Robbie Marcus, the downward movement in the stock is justified, as potential value creation in the nutrition sector helps counterbalance softer foundational business operations. Meanwhile, RBC Capital Markets analyst Au Kendall stated that they view the forecast unfavorably to the extent of affecting 2027. Within the past month, several analysts have issued Buy ratings for the company, featuring a high price target of $136.00, a low of $103.00, and an average target of $121.39, while the three-month consensus remains a Strong Buy stemming from one Hold and 13 Buy ratings alongside a mean price target.
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