Abbott Is Splitting Off Similac and Pedialyte: Stock Falls 4% as an $8.5 Billion Breakup Meets a Guidance Cut

Abbott Laboratories is splitting itself in two. The healthcare giant said Wednesday it will separate its nutrition business — home to Similac infant formula, Pedialyte and Ensure — into an independent, publicly traded company with about $8.5 billion in annual sales, while cutting its 2026 sales-growth forecast. Abbott stock fell about 4% in morning trading, even as third-quarter sales rose more than 14% to $13.01 billion.

The short answer: what did Abbott announce?

Abbott plans to spin off its global nutrition business into a standalone company by the end of 2027. Abbott shareholders will receive shares in the new company and will own stock in both businesses after the separation. The deal is intended to qualify as a tax-free separation for U.S. federal income tax purposes, and Abbott said it does not expect the move to change its 2026 guidance or the 2027 guidance it plans to give in January.

Daniel Salvadori, who currently leads Abbott's established pharmaceuticals and nutritional products division, is slated to lead the new nutrition company. After the split, the remaining Abbott would have about $42 billion in annual sales, focused on medical devices, diagnostics and established medicines.

What happened in Abbott's third quarter?

Abbott reported third-quarter revenue of $13.01 billion, up about 14.5% from a year earlier and just above consensus estimates near $12.99 billion to $13 billion. Adjusted earnings were $1.42 per share, essentially in line with analyst averages compiled by LSEG and FactSet — though one consensus measure tracked by Zacks put the result a fraction below expectations.

Profit on a GAAP basis told a different story. Net profit fell to $920 million, or $0.53 per share, down from $1.64 billion, or $0.94 per share, a year earlier, as total operating costs and expenses rose 25% to $11.66 billion, reflecting higher input costs, research spending and specified items including intangible amortization and legal settlements.

By segment, diagnostics was the standout: sales jumped 47% to $3.31 billion. Medical devices rose 6.9% to $5.83 billion, though that missed an average estimate of $5.88 billion, with weaker heart-device sales weighing on the result. Nutrition sales rose 5.1% to $2.26 billion, and established pharmaceuticals sales rose 6.8%.

Why is the stock falling if sales beat forecasts?

Two things weighed on Abbott stock more than the headline sales beat. First, Abbott lowered its 2026 comparable sales-growth outlook to about 6%, down from 6.5% to 7.5% previously, while tightening its full-year adjusted earnings forecast to $5.50 to $5.55 per share, from $5.45 to $5.60. Analysts noted the softer outlook could also moderate expectations for 2027.

Second, the split itself creates uncertainty. Shares fell about 3.4% to 4% in premarket and morning trading, and the stock is down roughly 18% so far this year. J.P. Morgan analyst Robbie Marcus said the lower trading was appropriate, with the potential for value creation from the nutrition separation partially offsetting moderated underlying business fundamentals. This report describes what happened and how markets reacted; it is not a recommendation to buy, sell or hold any security.

Why spin off nutrition now?

Abbott said the nutrition business will be better positioned as an independent company to direct its resources across its priorities, while the remaining Abbott can focus on what Chief Executive Robert Ford called its core, higher-growth, innovation-driven portfolio of medical devices, diagnostics and established medicines. "We believe both businesses will be better positioned for the future as independent organizations," Ford said on a call with analysts.

The unit being separated has also been the company's most troubled. Reuters reported the pediatric nutrition business lost a major U.S. government supply contract last year and faced higher manufacturing costs that forced price increases, which in turn hurt demand from budget-conscious consumers. The business has faced years of litigation and federal scrutiny following the 2022 recall and shutdown of Abbott's Sturgis, Michigan, plant. Abbott has defended the safety of its products, and Ford said outstanding legal disputes were unlikely to delay the separation. The Wall Street Journal noted Abbott did not make clear on Wednesday whether litigation liability will stay with Abbott or move to the new company — a detail investors will be watching.

Abbott joins other large healthcare companies, including Johnson & Johnson and Medtronic, that have announced separations in recent years to sharpen focus on higher-growth segments.

What happens next?

The separation is expected to be completed by the end of 2027. Abbott expects one-time charges related to the transaction, which it will quantify later. In the nearer term, Abbott guided for fourth-quarter adjusted earnings of $1.62 to $1.67 per share, compared with analyst views around $1.64, and it plans to provide 2027 guidance in January — guidance it said the separation will not affect.

Sources

FAQ

What is Abbott spinning off?

Abbott is separating its global nutrition business, which includes Similac infant formula, Pedialyte and Ensure, into an independent publicly traded company with about $8.5 billion in annual sales.

When will the Abbott nutrition spin-off be completed?

Abbott expects to complete the separation by the end of 2027, and shareholders will own shares in both Abbott and the new nutrition company after it closes.

Why did Abbott stock fall after earnings?

Shares fell about 4% in morning trading after Abbott cut its 2026 comparable sales-growth outlook to about 6% and reported lower GAAP profit, despite revenue of $13.01 billion beating consensus.

What were Abbott's Q3 2026 results?

Abbott reported revenue of $13.01 billion, up about 14.5% year over year, adjusted earnings of $1.42 per share, and GAAP profit of $920 million, or $0.53 per share.