UPDATE: Morgan Stanley Upgrades Abbott Laboratories

In a report published Friday, Morgan Stanley analyst David Lewis upgraded Abbott Laboratories (NYSE: ABT) to Overweight, with a $45.00 price target.

According to the report, the upgrade reflects growth and leverage prospects into 2H14 and 2015 are underappreciated. Guidance for 2014 likely includes known headwinds FX, Nutrition and EPD, but the analysts view consensus estimates as reasonable.

“Lingering impacts of Fonterra, FX, and ramping spend on Nutritionals production for Asia are near term drags that likely mute upside to ‘14 guidance. ABT's 40% emerging market revenue mix is largely unhedged, implying '13 FX moves could pressure 1H margins, in line with COV and JNJ commentary,” the report noted. “We forecast flat EBIT margins in 1H14, conservative vs. the >150bps improvement we estimate for 2H13 despite incremental spend on the Nutritionals recovery. Our revised FX assumptions reduce reported revenues by 2% (largest delta is EPD down 4% given EM mix) and shave $0.02 off our EPS estimate. We are comfortable with the consensus '14 outlook for revenue growth >5% and EPS at $2.21/up 10%.”

ABT closed Thursday at $39.54.