U.S. Markets closed

Is a Beat in Store for AbbVie (ABBV) This Earnings Season?

Zacks Equity Research

We expect AbbVie Inc. ABBV to beat expectations when it reports first-quarter 2018 results on Apr 25, before market open. In the last reported quarter, the company delivered a negative earnings surprise of 1.04%.

Shares of AbbVie have declined 15.8% so far this year compared with the industry‘s decrease of 3.4%.

 

Notably, AbbVie’s earnings history is decent with the pharmaceuticals company outpacing estimates in three of the last four quarters with the average beat being 2.58%.

Let’s see how things are shaping up for the company this quarter.

Factors to Consider

AbbVie’s flagship product, Humira, which is approved for several inflammatory indications, has been witnessing rising sales trends despite the launch of drugs with new mechanisms of action in the United States. U.S. sales are likely to increase in the soon-to-be reported quarter, continuing the momentum achieved in the fourth quarter. However, competition from biosimilars versions of the drug launched in Europe hurt international sales significantly in the last reported quarter. The adverse impact of biosimilars is expected to persist in the first quarter of 2019.

U.S. Humira sales are expected to be $3.2 billion in the soon to-be reported quarter while the guidance for international sales stands at $1.2 billion. The Zacks Consensus Estimate for first-quarter Humira sales is pegged at $4.37 billion.

A key oncology medicine Imbruvica has shown impressive adoption in the approved indications, especially front-line chronic lymphocytic leukemia. AbbVie continues to develop the drug in several indications. In January 2019, the drug’s label was expanded to include first-line treatment of chronic lymphocytic leukemia/small lymphocytic lymphoma (CLL/SLL) in combination with Roche’s RHHBY Gazyva. However, the company announced in the same month that the drug failed to meet primary endpoint in a late-stage pancreatic cancer study. The company expects Imbruvica to record sales of approximately $1 billion in the first quarter. The Zacks Consensus Estimate for the drug is pegged at $1.02 billion for the soon-to-be reported quarter.

Other drugs, namely Duodopa and Creon, are also likely to continue their strong performance in the soon-to-be-reported quarter. The Zacks Consensus Estimate for Duodopa and Creon sales is $114 million and $230 million, respectively.

Sales of another leukemia drug, Venclexta, are also growing rapidly on the back of label extensions. In the fourth quarter of 2018, the drug was approved in three new indications including newly-diagnosed acute myeloid leukaemia (“AML”) in older patients. These label expansions are likely to boost sales in the soon-to-be reported quarter. However, in March, the FDA placed a late-stage study evaluating Venclexta for treating multiple myeloma on partial clinical hold due to higher proportion of deaths compared to control arm.

AbbVie’s hepatitis C virus (“HCV”) segment also showed impressive growth on the back of better-than-expected uptake of Mavyret despite stiff competition in 2018. Mavyret has become a major growth driver for AbbVie within a short time and commanded roughly 50% market share globally last year. We expect the drug to contribute significantly to the to-be-reported quarter’s results.

Operating expense may be on the higher side due to ongoing clinical studies and launch of drugs and label expansions.

AbbVie expects earnings per share for the quarter to be in the range of $2.05 and $2.07. Revenues are expected to be approximately $7.7 billion. However, currency movement is likely to have an unfavorable impact of nearly 2%. The Zacks Consensus Estimate for earnings per share and revenues stands at $2.05  and $7.72 billion, respectively.

Why a Likely Positive Surprise?

Our proven model indicates that AbbVie is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate ($2.07) and the Zacks Consensus Estimate ($2.05), stands at +0.89%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: AbbVie has a Zacks Rank #3. The combination of a positive Earnings ESP and a favorable Zacks Rank makes us reasonably confident of an earnings beat.

Conversely, we caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

AbbVie Inc. Price and EPS Surprise

 

AbbVie Inc. Price and EPS Surprise | AbbVie Inc. Quote

Other Stocks That Warrant a Look

Here are some biotech stocks that you may also want to consider, as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases.

Aduro Biotech, Inc. ADRO has an Earnings ESP of +82% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Incyte Corporation INCY has an Earnings ESP of +14.47% and a Zacks Rank #2. The company is scheduled to release first-quarter results on Apr 30.

Is Your Investment Advisor Fumbling Your Financial Future?

See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”

Click to get it free >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
AbbVie Inc. (ABBV) : Free Stock Analysis Report
 
Roche Holding AG (RHHBY) : Free Stock Analysis Report
 
Aduro Biotech, Inc. (ADRO) : Free Stock Analysis Report
 
Incyte Corporation (INCY) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research