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Buy Pharma Giant AbbVie Stock Before Q4 Earnings for Dividend and Value?

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Benjamin Rains
·4 min read
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AbbVie ABBV is one of hundreds of companies set to report its quarterly earnings results in the first week of February. The maker of Humira has seen its stock underperform the market over the last six months and Wall Street took profits in the last week of January, even as some of the biggest companies in the world posted blowout results.

The pullback could spell opportunity. So, let’s check out AbbVie to see if investors might want to buy the stock ahead of its fourth quarter fiscal 2020 financial release that’s due out before the opening bell on Wednesday, Feb. 3.

Prepared for What’s Next

ABBV’s patent protections for one of the world’s top-selling drugs, Humira, are running out. In fact, biosimilars are already available outside of the U.S., with domestic competition due in 2023. The prospect of its cash cow being greatly hobbled helped push AbbVie to complete its $63 billion acquisition of Allergan in May 2020.

The Allergan deal added Botox and other popular drugs to AbbVie's roster of therapeutics that spans a range of illnesses and diseases. ABBV’s R&D pipeline is also strong. “Results from key growth products–including Skyrizi, Rinvoq and Ubrelvy–continue to track ahead of our expectations, our aesthetics portfolio is demonstrating a strong V-shaped recovery, our hematologic-oncology franchise is delivering double-digit growth and we're advancing numerous attractive late-stage pipeline programs," CEO Richard Gonzalez said in prepared remarks last quarter.

Last quarter, global Humira sales climb 4%, driven by 8% growth in the U.S., while international sales slipped 9%. Meanwhile, the pharmaceutical giant’s overall third quarter revenue surged 52%, driven by Allergan’s inclusion.

Peeking around the corner, Zacks estimates call for its adjusted Q4 earnings to climb 29% to $2.86 a share, on 58% stronger revenue that would see it pull in $13.7 billion. Taking a wider view, AbbVie’s full-year revenue is projected to climb over 37% in 2020, with FY21 expected to jump an additional 18%. Meanwhile, its adjusted EPS figures are projected to climb 17% and16%, respectively.

What Else…

ABBV has easily outpaced the Large-Cap Pharma industry during the past year, up 25% vs. 7%. More recently, the stock has jumped 20% in the last three months. That said, it has fallen nearly 10% from its mid-January highs to around $102 a share, which might offer a more enticing opportunity.

Despite its outperformance against its peers, the stock trades at a solid discount at 8.5X forward 12-month earnings vs. 14.6X. AbbVie has also continually raised its dividend, including a 10% bump last quarter.

ABBV’s dividend yield comes in at 5.1% to easily beat its industry’s 2.3% average, as well as Eli Lilly’s LLY 1.6% and Pfizer’s PFE 4.4%. This also looks great against the 30-year U.S. Treasury’s 1.8%. In fact, it was AbbVie’s valuation and its dividend that attracted Warren Buffett and Berkshire Hathaway’s attention in Q3, as the firm bought up pharmaceutical stocks.

ABBV lands a Zacks Rank #3 (Hold) at the moment, alongside an “A” grade for Value and a “B” for Growth in our Style Scores system. The company has also consistently topped our bottom-line estimates, and 12 out of the 18 brokerage recommendations Zacks has for AbbVie come in at a “Strong Buy.”

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