Abbott Restarts Michigan Baby Formula Plant; Street Says Buy

Abbott Laboratories’ (ABT) Abbott Nutrition has commenced production at its Michigan baby formula plant, which had remained closed since February due to contamination. The move is a step forward toward mitigating the impact of the national shortage of baby formula.

According to Abbott, it will take around three weeks for products to occupy shelves. Initially, the company is focusing on the production of EleCare, its specialty formula for infants suffering from severe food allergies and digestive problems.

Abbott closed its Michigan plant after the U.S. FDA flagged bacterial infections in infants who consumed the formula. Abbott stated that its products were not linked to these infections.

The government has had to relax foreign import rules and procure formula from Europe to ease off the shortage pressures. Abbott is one of the four biggest formula producers in the U.S.

In the wake of these shortages, the FDA acknowledged that it needs to undergo reforms and blamed slow coordination and outdated technology for the delay in its response to reports of safety lapses at the Michigan plant.

Analyst’s Take

Despite these ongoing woes, the Street remains Bullish on the stock with a Strong Buy consensus rating based on seven Buys and a Hold.

BTIG analyst Marie Thibault has reiterated a Buy rating on the stock alongside a price target of $140. The average Abbott price target of $139.38 implies a potential upside of 19.57%. That’s after a 16.2% slide in share prices so far in 2022.

Hedge Funds Are Lapping Up Abbott

Amid the supply shortage and negative sentiment around Abbott, hedge funds have been buying up the company’s shares. TipRanks data indicates hedge funds have increased holdings in Abbott by 1.1 million shares in the last quarter, indicating a very positive hedge fund confidence signal. Moreover, Ray Dalio’s Bridgewater Associates has a holding in the company worth about $360.46 million.

Closing Note

The restarting of the Michigan plant is a major development for Abbott and should ease the pressure on the company’s shares. Furthermore, this is also expected to gradually ease the pain of consumers in the coming months.