Abbott Laboratories (ABT) shares fell more than 4% before the bell on October 21 after the company said it will spin off its Nutrition business, home of Similac, Pedialyte and Ensure, into a separate public company by the end of 2027. The unit brings in about $8.5 billion a year.
Abbott is letting go of its slowest business this year. But the news came with a lower sales outlook, and the release didn’t say which company keeps the baby formula lawsuits.
What Abbott Shareholders Actually Get
Abbott plans to run the split as a tax-free distribution, pending regulatory approvals and a Form 10 filing. Abbott holders would own shares of both companies, and Abbott expects the two dividends combined to match its payout at the time of separation. What stays behind is a medical device, diagnostics and branded generics company with about $42 billion in annual sales.
Abbott also said the separation won’t change its 2026 guidance or the 2027 outlook due in January. One-time charges are coming, though the company hasn’t sized them yet. Daniel Salvadori, who runs Abbott’s nutrition and established pharma businesses, will lead the new company.
Nutrition Has Gone Nowhere in Five Years
Nutrition brought in $8.45 billion in 2025, barely above the $8.29 billion it made in 2021. That’s under 2% growth over four years, with a drop to $7.46 billion in 2022, the year of the Sturgis, Michigan formula recall.
This year hasn’t helped. Through nine months, Nutrition’s comparable sales fell 2.1% and U.S. sales fell 4.5%, making it Abbott’s only shrinking segment, according to the third-quarter release. The third quarter was better, with comparable growth of 4.9%.
Strip Nutrition out, and the rest of Abbott grew about 6.9% on a comparable basis over those nine months, against 5.2% for the whole company. On this year’s numbers, the business Abbott keeps is the faster one.
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Why ABT Stock Fell Anyway
Two other things landed this morning. Abbott now expects 2026 comparable sales growth of about 6%, down from 6.5% to 7.5%. One point of growth on Abbott’s comparable base is roughly $475 million of sales. The EPS midpoint held at $5.525, but this is the second guidance trim of the year, after Abbott stock fell 6% in April on the Exact Sciences dilution.
The other is the lawsuits. Third-quarter adjusted EPS of $1.42 excludes about $670 million to resolve the Gill case and necrotizing enterocolitis (NEC) claims for about 2,000 more infants. GAAP EPS was $0.53.
The drop erased roughly $7 billion of market value from a stock that was already cheap by its own history. Abbott’s NTM P/E sat at 17.68x, against a five-year average of 23.35x and a low of 14.73x.
The Question Abbott Hasn’t Answered Yet
Abbott hasn’t said which company will carry the NEC liability, and those settlements didn’t end the litigation. The answer has to show up in the Form 10 registration the spinoff needs before it can close.
The 6.9% growth without Nutrition makes the case for the split, but it’s a nine-month number, not guidance, and today’s 17.68x multiple still includes Nutrition’s earnings. It doesn’t tell you what the devices, diagnostics and branded generics business Abbott keeps is worth.
Owning both companies doesn’t make the lawsuits go away for today’s holders. Where the NEC liabilities, debt and cash land will shape what each stock is worth, and Abbott hasn’t disclosed any of it. The verdict on value comes with the Form 10, which has to spell that out.
So what is Abbott stock actually worth?
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