A month has gone by since the last earnings report for AbbVie Inc. ABBV . Shares have added about 9.7% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to its next earnings release, or is ABBV due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
AbbVie Tops Q4 Earnings & Revenues, Ups 2018 Guidance
AbbVie reported better-than-expected results for the fourth quarter of 2017. Importantly, it raised its earnings expectations for 2018 based on continued strong operational performance and lower tax rates.
AbbVie reported fourth-quarter 2017 earnings of $1.48 per share, beating the Zacks Consensus Estimate $1.44 by 2.8% and came ahead of the guided range of $1.42 and $1.44. Earnings grew 23.3% year over year. Strong sales performance and higher operating profits led to the bottom-line beat.
Including a charge related to the recent tax law changes and other one-time/special items, earnings were 3 cents per share compared with 85 cents in the year-ago quarter.
Revenues of $7.74 billion in the reported quarter marginally beat the Zacks Consensus Estimate of $7.6 billion. Sales increased 13.9% year over year. Excluding a 1.5% favorable impact from foreign exchange rate fluctuations, operational revenues rose 12.6% backed by continued strong performances by Humira and Imbruvica and solid initial uptake of Mavyret. Operational revenue growth also surpassed management expectations of approximately 10% growth.
Quarter in Details
Humira recorded sales growth of 14% (12.3% on an operational basis) with revenues coming in at $4.89 billion, reflecting continued strong demand trends. Sales in the United States increased 15.1% to $3.3 billion.
Humira sales in the ex-U.S. market were up 6.5% on operational basis and 11.7% on a reported basis to $1.58 billion.
In 2018, Humira sales growth in the United States is expected to be approximately 13% to 14% while internationally, Humira sales are expected to peak at approximately $6.2 billion.
Fourth-quarter net revenues from Imbruvica were $708 million, up 38.7% year over year. This included Imbruvica U.S. sales of $585 million, up 35.3% and $123 million (up 57.8%) of international profit sharing. Continued uptake in the front-line CLL market and steady gains across other indications led to the strong performance of Imbruvica.
In 2017, AbbVie met its expectations of recording Imbruvica global revenues of more than $2.4 billion with sales in the United States crossing $2 billion. In 2018, Imbruvica global revenues are expected to exceed $3.3 billion with sales in the United States likely to cross $2.7 billion.
Other products that performed well include Lupron (224 million, up 1.8% year over year) Duodopa ($100 million, up 21.3% year over year) and Creon ($235 million, up 10.6%).
Despite competitive dynamics in the HCV market, AbbVie HCV sales, including Viekira and Mavyret, were $510 million in the quarter, up 62.7% on an operational basis. Strong uptake of Mavyret in the United States and international markets led to the increase.
On the call, management mentioned that Mavyret has witnessed strong uptake both in the United States and internationally.
In 2018, global HCV sales are expected to exceed $2.5 billion with a roughly equal split between U.S. and outside U.S. markets.
Adjusted SG&A expenses inched up 0.9% to $1.64 billion. However, as a percentage of sales, SG&A expenses declined 270 bps to 21.2% driven by sales leverage and operational efficiencies. R&D expenses escalated 12.5% to $1.32 billion in the quarter due to greater investments in the pipeline. Adjusted operating margin was 40.7% of sales in the reported quarter, up 90 bps year over year.
2017 Results
Full-year sales jumped 10.1% year over year on an operational basis to $28.2 billion. Sales outpaced the Zacks Consensus Estimate of $28 billion. Revenue growth was in line with expectations of 10% growth on an operational basis.
Adjusted earnings of $5.60 per share for the full year exceeded the Zacks Consensus Estimate of $5.56 as well as the guided range of $5.53-$5.55. Earnings rose 16.2% year over year.
2018 Outlook
AbbVie raised its adjusted EPS guidance to a range of $7.33-$7.43 for 2018 from $6.37-$6.57 predicted earlier. Consistently strong organic growth coupled with tax rate reductions as result of the recent U.S. tax reforms propelled the increase in earnings guidance. The guidance reflects a year-over-year increase of 32% at the mid-point.
Revenues are expected to approach $32 billion, reflecting year-over-year growth of approximately 13%. Currency impact is expected to benefit revenues by 1.5% in 2018.
While R&D expense is expected to be roughly 16% of sales, SG&A is expected to be just over 20% of sales. Operating margin is expected to be approximately 44%, roughly 150 basis points above 2017 levels. Adjusted tax rate is expected to be approximately 9% in 2018. The normalized tax rate expectation over next five years is 13%.
On the call, the company said that it plans to invest approximately $2.5 billion in capital projects in the United States over the next five years on increased access to foreign cash following the U.S. tax reforms. In addition, the company will accelerate its pension funding by $750 million and also plans to contribute $350 million to select not-for-profit organizations.
First-Quarter 2018 Outlook
First-quarter earnings are expected between $1.77 and $1.79. Revenues are estimated to grow in a mid-teen range on an operational basis. Foreign exchange is expected to have a 3% favorable impact on sales in the first quarter.
U.S. Humira sales are expected to grow in a low-teens range year over year. Internationally, operational sales growth is expected in the mid single-digits range. Imbruvica U.S. sales are expected to grow in the mid single-digits range sequentially over the fourth quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 19% due to these changes.
AbbVie Inc. Price and Consensus
AbbVie Inc. Price and Consensus
At this time, ABBV has an average Growth Score of C, while it is doing a lot better on the momentum front with A. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth than value and momentum investors.
