Earnings Preview: Abbott expected to post solid 2Q

OVERVIEW: Earlier this month, Abbott won federal approval to market its highly anticipated Xience V drug-coated stent. The company has touted the product as a safer alternative to similar products from Johnson & Johnson, Boston Scientific Corp. and Medtronic Inc.

Demand for drug-coated stents, which are used to prop open arteries once they have been surgically cleared of fatty plaque, has declined since 2006 when research suggested they may not be as safe as older, bare metal stents.

Approval for Xience will give the North Chicago, Ill.-based company a new revenue driver to complement its blockbuster drug Humira, which drove earnings in the first quarter. The drug, which saw sales increase over 50 percent in the first quarter, is used to treat rheumatoid arthritis, the skin condition psoriasis and other autoimmune disorders.

BY THE NUMBERS: Analysts polled by Thomson Financial, on average, expect second-quarter profit of 79 cents per share on $7.23 billion in revenue.

ANALYST TAKE: Throughout the second quarter, analysts maintained a mostly positive outlook for Abbott, saying its dual focus on drugs and devices has helped it weather challenges facing competitors who only market pharmaceuticals.

Lehman Brothers analyst Charles Butler noted that Abbott benefited from the Food and Drug Administration's recent rejection of a experimental cholesterol drug, Cordaptive, from rival Merck & Co. Cordaptive is similar to Abbott's Niaspan but is designed to avoid flushing or redness, a common side-effect of Niaspan.

The FDA's rejection of Cordaptive in May "effectively removes the competition for Abbott in the niacin-containing products space for the foreseeable future," Butler wrote in a recent note to investors.

WHAT'S AHEAD: Goldman Sachs analyst Lawrence Keusch expects Abbott's new Xience stent to grab 30 percent of the drug-coated stent market by 2009, expanding company revenues.

STOCK PERFORMANCE: Shares of Abbott fell nearly 2 percent during the quarter to finish at $52.97. The stock ended Monday's trading at $56.22.