Beetles in Baby Formula Doesn't Hurt Abbott Shares? (ABT)

Abbott Nutrition is initiating a proactive, voluntary recall of certain Similac-brand, powder infant formulas in the U.S., Puerto Rico, Guam and some countries in the Caribbean.

Abbott is recalling these products following an internal quality review, which detected the remote possibility of the presence of a small common beetle in the product produced in one production area in a single manufacturing facility.

Abbott Laboratories (NYSE: ABT), which owns Abbott Nutrition, is hardly being punished for the recall. Shares are down 0.33% this afternoon, to $51.82. Further, the stock has rallied from $46 in June to near $52 in September.

While the United States Food and Drug Adminstration (FDA) has determined that the formula containing these beetles poses no immediate health risk, what's the deal here? Shouldn't the stock take some sort of hit for a recall involving beetles in baby formula?

Sure, Abbott likely only earns a fraction of its earnings from Similac. But when it comes to infant safety, most consumers take no chances. The brand could take a considerable hit, and that would impact revenues.

Investors should be cautious when looking at Abbott Labs.

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