Shares of AbbVie Inc. (ABBV, Financial) were down slightly on the heels of second-quarter results after the pharmaceutical giant exceeded expectations on growth in revenue and earnings. Late Monday morning, the stock sold for $89.80 a share, down 0.84%. But I expect that the stock will start to up-trend again.
The U.S. healthcare company that began as a spin-off of Abbott Labs (ABT) in 2013, exceeded expectations on growth in revenue and earnings. AbbVie reported earnings adjusted to one-time charges of $2 per diluted share. This was nearly 41% higher than second quarter 2017. AbbVie beat analysts’ expectations on adjusted earnings per share by 3 cents and generated a positive surprise of 1.5%.
For the quarter, AbbVie reported revenue of $8.278 billion, a 19.2% increase on a year-over-year basis. It beat expectations by $70 million.
The revenue of AbbVie is driven by the sale of Humira, the trade name of Adalimumab, a drug used to treat rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, Crohn's disease and several other physical conditions. The company closed its second-quarter reporting Humira sales of $5.185 billion, a 10% increase on a year-over-year basis. Humira sales represented approximately 62.6% of AbbVie’s total net revenues.
AbbVie also reported quarterly sales for its other key products:· treatment for HCV: $973 million, up more than 100%;· Imbruvica: $850 million, up 35.6%;· Synagis: $44 million, up 10.1%;· Creon: $219 million, up 11.4%; Lupron: $223 million, up 5.9%.
The chart below shows the trend in AbbVie’s second quarter revenues from 2014 to 2018.
CEO Richard A. Gonzalez commented: “We are extremely pleased with the strong momentum of our business in the quarter and progress year-to-date. We've driven strong commercial, operational and R&D execution, resulting in top- and bottom-line results once again ahead of our expectations."
The CEO added that a significant contribution to the strong performance was given by Humira, Imbruvica, and Mavyret, as well as income-producing assets.
The company has such confidence in the business that the guidance on adjusted earnings per share for full fiscal 2018 has been raised by 1.3% to a new range of $7.76 to $7.86 per share from a previous range of $7.66 to $7.76 per share. That was the third hike in adjusted earnings per share. Compared to 2017, the company’s expectation represents a nearly 38% growth.
GAAP earnings are predicted by AbbVie to average $6.52 per diluted share, which is a mean of a $6.47 to $6.57 per diluted share range.
AbbVie has fallen 8% so far this year and has a market capitalization of $143.71 billion.
The 52-week range is $69.47 to $125.86 per share.
According to the chart powered by GuruFocus, the share price of AbbVie is above the Peter Lynch Earnings Line (P/E = 15) of $59.5 and the Price at Med P/E without NRI (P/E = 18.89) of $77.8.
When the forward price-earnings ratio of 11.6 times is multiplied by an average quarterly weighted earnings per share of $8.43, it yields a value of $97.79 per share. That average represents a nearly 8% growth from the current market valuation.
For the next 52-weeks of trading, analysts target a price of $110.24 per share. That is a 22% growth. The average target price is a mean of a total of 21 estimates ranging from $78 to $157 per share.
Wall Street holds a recommendation rating of 2.4 out of 5 on AbbVie. As of July, 50% of analysts are for a buy to strong buy approach and 50% of analysts are for a hold approach.
Disclosure: I have no positions in any stock mentioned in this article.
