The Covid-19 pandemic has had serious implications on businesses across the globe, but AbbVie (NYSE:ABBV) stock is thriving amidst the chaos. As the virus continues to spread across the nation with the emergence of new hotspots, the need for a vaccine is now greater than ever.
The public health crisis threw many pharmaceutical businesses like AbbVie into the spotlight, but the company handled the ongoing crisis better than its competitors. ABBV stock reported first-quarter earnings early in May and beat industry estimates. They earned revenue of $8.6 billion with earnings per share at $2.02. As companies see their market valuations evaporate, ABBV stock proves to be a safe bet for investors in an increasingly volatile market.
Humira Shines In U.S Markets
ABBV stock faced numerous challenges in 2019 and acquired Humira with hopes of diversifying their growth. The pharmaceutical company that specializes in treatment for Crohn’s disease and psoriasis did not perform as expected in international markets. The sales of the drugs were down by $4.31 billion (or 31.1%). This was largely due to competition from Humira biosimilars.
However, Humira was able to make some serious headway in U.S markets, where they earned a revenue of $3.7 billion and saw a 13.7% increase in sales in the first quarter. ABBV stock’s national earnings were able to offset their international losses. Humira continues to receive approvals from the FDA and recently scored a marketing approval that allows them to increase the Q2W dosage based on safety evaluations.
AbbVie’s growth is fueled by Humira’s local success, along with drugs like Imbruvica, Venclexta and Skyrizi that earned $300 million in revenue this year. These products help the company’s growth remain stable, making ABBV stock a sound investment.
Allergan Leads The Way
In 2019, AbbVie made a bold move and acquired the Botox company, Allergan, for $63 billion. While the company was met with some roadblocks during initial talks, the acquisition was successfully completed on May 11. Analysts estimate that it will add another $30 billion in revenue, bringing AbbVie’s 2020 revenues to a total of $50 billion.
The acquisition of Allergan included a $41 billion cash payout which had a significant impact on AbbVie’s balance sheet. In an effort to curtail its debt, the company issued $30 billion in unsecured notes to bankroll the acquisition. Their current debt-to-asset ratio is 76.9%.
However, ABBV stock’s long-term prospects of the acquisition remain fundamentally robust. Allergan will allow AbbVie to diversify its product portfolio in the fields of oncology and neuroscience while growing its revenue base. A combination of new assets and financial freedom will help it capitalize on innovation and develop new products for the unmet needs in the market.
Another game-changer for ABBV stock is Allergan’s best-selling product: Botox. In Q4 of 2019, the product generated $1 billion in revenue for the company. Now part of AbbVie’s docket, new innovations in Botox could result in gargantuan revenues for the company.
What makes Botox unique is that no biosimilars for the product currently exist in the market, making AbbVie a monopoly in this field. Its CEO also claims that creating a copycat version of the product is, by no means, an easy feat.
ABBV Stock Is a Winner for Dividends
AbbVie’s acquisitions have set them up for long-term success and this is reflective in ABBV stock’s prices. ABBV stock is a shining star in the pharmaceutical industry and saw a 4.02% shift in prices this year. The stock pays $1.18 per share with a dividend yield of 5.12% which is lightyears ahead of the S&P 500’s yield of 2.11%.
ABBV stock’s dividend payout has increased by 5 times in the last five years, which equates to an annual average increase of 21.75%. In just the past year, the company’s dividend increased by 10.3%. Given the successful acquisition of Allergan, analysts predict that dividends will only continue to increase in the coming years.
Moreover, AbbVie maintains a healthy cash dividend payout ratio of 49% which is a testament to their ability to pay dividends in the long-term. ABBV stock is unlikely to join the slew of pandemic-hit companies that have axed dividends.
The Bottom Line
ABBV stock has emerged relatively unscathed from the ongoing crisis. As companies struggle to keep their heads above water, AbbVie has successfully acquired a major player in the pharmaceutical industry while making waves with Humira in the U.S market.
This is in addition to the high dividend yield that investors benefit from, alluding to the sentiment that all hope is not lost in our pandemic-stricken society. ABBV stock is expected to dish out some serious returns in the upcoming years so we recommend you stay bullish on this buy despite the company’s high debt levels.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020. As of this writing, Divya Premkumar did not own any of the aforementioned stocks.