AbbVie (ABBV) Up 30% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for AbbVie (ABBV). Shares have added about 30% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is AbbVie due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

AbbVie Beats on Q3 Earnings & Sales, Ups 2020 Guidance

AbbVie reported earnings of $2.83 per share for the third quarter of 2020, comfortably beating the Zacks Consensus Estimate of $2.75 and exceeding the guided range of $2.73-$2.74. Earnings rose 21.5% year over year.

Meanwhile, the company’s revenues of $12.9 billion beat the Zacks Consensus Estimate of $12.67 billion. The top line improved 51.9% year over year on a reported basis. However, on a comparable operational basis, revenues increased 4.1% despite the negative impact of the COVID-19 pandemic on new patient starts of some drugs.

Sales growth was driven by higher sales in Immunology franchise and a faster-than-expected recovery in the Aesthetics and Neuroscience portfolio.

The comparable operational growth rate includes full quarter, current year, and historical results for Allergan on a pro forma basis and are presented on a constant currency basis.

Quarter in Details

In the immunology franchise, Humira sales rose 4.1% (up 4.4% on a comparable operational basis) to $5.14 billion as higher U.S. sales were offset by a decline in international markets.

Sales in the United States climbed 7.7% to $4.19 billion driven by higher demand and price, partially offset by lower new patient starts due to the COVID-19 pandemic. However, Humira sales in the ex-U.S. markets were down 8% on an operational basis and 9.3% on a reported basis to $951 million

International sales were severely impacted by the launch of several direct biosimilar drugs in Europe and other international markets.

In 2020, Humira is expected to record revenue growth of approximately 8% in the United States. International Humira sales are expected to approach $3.7 billion versus the previous expectation of $3.5 billion in 2020.

New immunology drugs, Skyrizi and Rinvoq registered sales of $435 million and $215 million, respectively. In the previous quarter, Skyrizi and Rinvoq recorded sales of $330 million and $149 million, respectively. Strong sequential growth in sales of both drugs in the past couple of quarters reflects strong uptake.

AbbVie expects Skyrizi global revenues of approximately $1.5 billion versus $1.4 billion expected previously. Rinvoq global revenues are expected to be approximately $700 million versus $600 million expected previously.

AbbVie’s oncology/hematology (including Imbruvica and Venclexta) sales rose 16.4% on an operational basis to $1.72 billion in the quarter, driven by strong growth of both Imbruvica and Venclexta.

Third-quarter net revenues from Imbruvica were $1.37 billion, up 9% year over year. U.S. sales of Imbruvica grossed $1.12 billion, up 7.4% from the year-ago figure driven by leading market share in CLL. AbbVie’s share of profit from International sales of the drug rose 17% to $251 million.

However, Imbruvica new patient starts in the CLL remain below pre-COVID levels.

Venclexta generated revenues of $352 million in the reported quarter, reflecting growth of 58.3% year over year on an operational basis driven by strong demand across all approved indications.

In 2020, Imbruvica global revenues are expected to be approximately $5.3 billion, down from $5.5 billion expected previously.

In Aesthetics franchise, Botox Cosmetic net revenues were $393 million, a decrease of 2.2% on a comparable operational basis while Juvederm Collection of filler recorded sales of $274 million, down 0.5% on a comparable operational basis. Sales of both the products improved from second-quarter levels as the aesthetics franchise experienced a faster-than-expected recovery from the COVID-19 pandemic, reflecting significant pent-up demand.

In 2020, AbbVie expects global aesthetics sales of approximately $2.5 billion compared with $2.4 billion previously.

In Neuroscience franchise, Botox Therapeutic net revenues decreased 1.8% on a comparable operation basis to $523 million. However, sales improved sequentially demonstrating a rapid recovery from COVID-19 impact. Vraylar sales were up 48.4% to $358 million. Duodopa sales rose 2% to $123 million. New drug Ubrelvy recorded revenues of $38 million in the quarter. The company said that Ubrelvy’s launch uptake was better than expectations.

In Eye Care, Restasis sales of $299 million declined 3.2% on a comparable operational basis. In Women’s Health, Lo Loestrin’s sales of $134 million increased 21.1% on a comparable operational basis. AbbVie’s new drugs Orilissa/Oriahnn recorded sales of $25 million versus $31 million in the previous quarter.

Among other key drugs. Mavyret sales totaled $414 million in the quarter, down 41.1% on a comparable operational basis due to competitive pressure in the United States, lower patient volumes in certain international markets and lower new patient starts due to COVID-19.

Costs Rise

Adjusted gross margin was 81.7% in the quarter. Adjusted SG&A expenses increased 68% to $2.72 billion while R&D expenses were $1.51 billion in the third quarter, rising 23.3% year over year. Adjusted operating margin represented 48.8% of sales, an improvement of 40 basis points versus the prior year.

Along with the earnings release, AbbVie announced a 10.2% increase in quarterly cash dividend from $1.18 per share to $1.30 per share. The first increased dividend will be paid in February 2021.

2020 Outlook

AbbVie issued new EPS guidance for 2020, which includes results of Allergan from May 8 to Dec 31. The company now expects adjusted EPS to be in the range of $10.47-$10.49 compared with $10.35-$10.45 expected previously, indicating growth of more than 17% at the midpoint. The guidance includes a 12% accretion on an annualized basis from the Allergan deal.

The increase in earnings expectations reflects recovery in demand for AbbVie’s products following COVID-19 related disruption in the second quarter.

In 2020, AbbVie expects revenues of approximately $45.7 billion versus $45.5 billion expected previously.

Adjusted gross margin is expected to be just above 82% of sales. Operating margin is expected to be approximately 48% of sales.

Fourth-Quarter 2020 Outlook

Fourth-quarter earnings are expected between $2.83 and $2.85 per share. AbbVie expects adjusted revenues of approximately $13.8 billion. Adjusted operating margin is expected to be above 45.6% of sales.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, AbbVie has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, AbbVie has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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