AbbVie Inc. (NYSE:ABBV) reported fourth-quarter- and full-year-earnings Friday morning, and ABBV stock stock responded by jumping more than 10% in early trading. What did the pharmaceuticals giant do right? There are three things that stood out.
Top-and Bottom-Line Beats
ABBV stock beat consensus fourth-quarter estimates on earnings and revenue. The company earned $1.48 per share, ahead of the $1.44 Wall Street was looking for and the company’s biggest earnings beat on a percentage basis (2.8%) in more than a year.
Sales even further outpaced expectations at $7.74 billion (analysts had estimated $7.53 billion). Those top- and bottom-line results represented year-over-year improvements of 23% and 11%, respectively—big upgrades from 2% and 8% growth in the previous quarter.
Strong Non-Humira Growth for ABBV Stock
AbbVie has long been associated with Humira, a drug that treats Chrohn’s disease, psoriasis, ulcerative colitis and several different types of arthritis. And with good reason: with $4.89 billion in sales, Humira accounted for more than half of AbbVie’s total fourth-quarter sales—a 14% improvement over the same quarter a year ago.
That’s impressive growth for a product as well-saturated as Humira. But a couple ABBV products are growing much faster.
Imbruvica and HCV, AbbVie’s second- and third-biggest sellers by revenue, grew sales by 38.7% and 63.4%, respectively, in the fourth quarter.
While several products, including AndroGel and Duodopa, saw decreased revenues, ABBV had 10 drugs that topped $100 million in sales in the fourth quarter. As the company becomes more diverse and less dependent on the success of Humira, the long-term sustainability of ABBV stock ratchets up.
Tax-Fueled Guidance Bump
The Trump administration’s new corporate-friendly tax laws should have a profound effect on AbbVie’s 2018 earnings. The company raised its full-year guidance to a range of $7.33 to $7.43, well up from its previous range of $6.37 to $6.57.
It plans to start devoting some of that extra cash—about $2.5 billion of it—to capital projects over the next five years. All of that bodes well for AbbVie’s future earnings. The midpoint of its raised guidance range would represent a year-over year EPS increase of roughly one-third.
Bottom Line on ABBV Stock
It’s been a great week for ABBV, jumping from $104 to all-time highs above $118. In fact, it’s been a great five months: ABBV traded below $70 as recently as August. After today’s encouraging earnings report, particularly its 2018 guidance, don’t expect the good times to end for AbbVie stock any time soon.
With a trailing P/E under 30 and a forward P/E under 20, the stock is still reasonably valued, especially given this year’s growth projection. While a 9% bump in one day is fairly extreme, I expect Wall Street to continue pushing ABBV until its value catches up with the company’s anticipated growth.
Remember: AbbVie stock was actually pretty stagnant in the last three months of 2017, trading in a range between $89 and $96. Having crossed the $100 barrier earlier this month, ABBV is clearly in full breakout mode.
If it’s anything like its last breakout, which began in mid-August, I fully expect AbbVie shares to keep rising well into February, perhaps past Valentine’s Day.
The longer-term picture looks bright too. Eventually, ABBV stock will correct, perhaps when the broad market finally pulls back. But whether you’re investing for the next month or the next couple years, ABBV looks like one of the more reliable investments in biopharmaceuticals today.
As of this writing, Chris Fraley did not hold a position in any of the aforementioned securities.
