Abbott Investors Think Two is Better Than One

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Shares of Abbott Laboratories (ABT) got a big bump this morning from news that the drug and medical products maker plans to split itself into two companies with one selling generic drugs and medical devices and the other selling research-based prescription medicines.

At $54.57, the shares climbed $2.12 or 4% during heady trading, with more than 17.2 million shares changing hands compared to an average daily volume of just over nine million shares.

The split, which the company says will go into effect by the end of 2012, adds Abbott to a list of companies that include Kraft Foods (KFT), McGraw-Hill (MHP) and the Williams Companies (WMB). Investors have long believed that Abbotts parts are worth more than the whole. The question remains, how much more?

A rough cut analysis by Leerink Swann analyst Rick Wise shows a sum-of-the-parts value of between $60 a share and $65 a share for the entire company. Of that sum, the research drug unit, with $18 billion in annual sales, would be worth between $35 a share and $40 a share.

Though the proposed spinoff of its pharmaceutical business was the news of the day, Abbott also posted strong third-quarter financial results and raised the low end of its 2011 earnings per share guidance.

Abbott earned $1.18 a share a penny better than the Str! eets con sensus estimates on revenue of $9.82 billion. And it now expects full-year earnings to range between $4.64 a share and $4.66 a share, up from its previous guidance of $4.58 share to $4.68 a share.