1 Stock You Shouldn't Sell No Matter What

With a $250.63 billion market cap, AbbVie Inc. (ABBV) is a research-based biopharmaceutical company that develops, manufactures, and sells pharmaceuticals worldwide. The company offers HUMIRA, a therapy for autoimmune and intestinal diseases, SKYRIZI to treat adult plaque psoriasis, and IMBRUVICA to treat chronic lymphocytic leukemia (CLL).

In addition, ABBV provides Duopa and Duodopa to treat Parkinson’s disease, Ubrelvy to treat migraine with or without aura in adults, and MAVYRET to treat patients with chronic HCV genotype 1-6 infection, and Lupron for the palliative treatment of advanced prostate cancer.

ABBV delivered solid second-quarter results with substantial progress in its new products and indications. “Importantly, Skyrizi and Rinvoq continued their impressive ramps and are on pace to deliver approximately $7.5 billion in combined annual sales, underscoring their significant potential," said ABBV’s chairman and chief executive officer Richard A. Gonzalez.

Earlier this month, ABBV announced the FDA’s approval of JUVÉDERM® VOLUX™ XC to improve jawline definition. Carrie Strom, President, Global Allergan Aesthetics and Senior Vice President, said, “JUVÉDERM® VOLUX™ XC complements our existing product line to provide even more structure, cohesivity, and lift capacity to create an improved jawline that appears more defined in real life and on camera.”

Also, in the same month, ABBV and Sosei Group Corporation entered a new drug discovery collaboration and option-to-license agreement to discover, develop, and commercialize novel medicines targeting neurological diseases. It leverages ABBV’s extensive neuroscience expertise and Sosei Heptares’s StaR® technology and SBDD platform.

The new strategic collaboration with Sosei Heptares might accelerate the company’s growth by advancing a pipeline of novel medicines across neurology.

On July 26, ABBV announced that the European Commission (EC) approved RINVOQ® for treating adult patients with moderate to severely active ulcerative colitis. “We celebrate today's approval of RINVOQ by the EC as it meaningfully expands our ability to help indicated patients in need of relief from ulcerative colitis,” said Thomas Hudson, senior vice president, chief scientific officer, AbbVie.

ABBV’s shares have gained 4.5% in price year-to-date and 18.2% over the past year to close the last trading session at $141.44.

Here is what could influence ABBV’s performance in the upcoming months:

Robust Financials

ABBV’s net revenues increased 4.5% year-over-year to $14.58 billion in the fiscal 2022 second quarter ended July 30, 2022. The company's earnings before income tax expense amounted to $1.18 billion, up 1.7% year-over-year.

The company’s net earnings came in at $924 million, registering an increase of 20.7% from the prior-year period. Also, its adjusted EPS rose 11.2% year-over-year to $3.37.

Favorable Analyst Estimates

Analysts expect ABBV’s revenue for the fiscal 2022 third quarter (ending September 2022) to come in at $14.99 billion, representing an increase of 4.5% from the same period in 2021. The current quarter's $3.60 consensus EPS estimate indicates an 8.1% year-over-year increase. The company has surpassed the consensus revenue estimates in three of the trailing four quarters.

In addition, the consensus revenue estimate of $59.08 billion for the fiscal year 2022 (ending December 2022) represents a growth of 5.3% from the previous year. The consensus EPS estimate of $13.86 for the ongoing year indicates a 9.1% year-over-year rise. Furthermore, Wall Street analysts expect the stock to hit $159.38 in the near term, indicating a potential upside of 12.7%.

High Profitability

ABBV's trailing-12-month gross profit margin of 70.72% is 29.2% higher than the 54.8% industry average. Its trailing-12-month EBITDA margin of 47.38% is 1,375.2% higher than the 3.21% industry average. Likewise, the stock's trailing-12-month net income margin of 22.04% compares with the industry average of negative 1.93%.

Furthermore, ABBV’s trailing-12-month ROCE, ROTC, and ROTA of 92.36%, 12.98%, and 8.83% are higher than the industry averages of negative 38.42%, 21.19%, and 29.59%, respectively.

Discounted Valuation

In terms of forward non-GAAP P/E, ABBV’s 10.20x is 50% lower than the 20.41x industry average. The stock’s 9.91x forward EV/EBITDA is 30.8% lower than the 14.32x industry average. Also, its forward Price/Sales multiple of 4.23 compares with the industry average of 5.01.

In addition, ABBV’s 10.33x forward Price/Cash Flow is 40.8% lower than the 17.47x industry average.

Power Ratings Show Promise

ABBV has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

ABBV has a grade of A for Quality, in sync with its higher-than-industry profitability multiples. Also, the stock has a grade of B for Growth, consistent with its revenue and earnings growth estimates.

ABBV is ranked #8 out of 169 stocks in the Medical-Pharmaceuticals industry.

Beyond what I have stated above, we have also given ABBV grades for Sentiment, Momentum, Value, and Stability. Get access to all the ABBV ratings here.

Bottom Line

ABBV reported solid fiscal 2022 second-quarter results. The business momentum, combined with advances across the biopharmaceutical company’s pipeline, is expected to keep driving its growth.

Given the company’s robust financials, higher-than-industry profitability, low valuation, and solid revenue and earnings growth estimates, we think it could be wise to stay invested in the stock.

How Does AbbVie Inc. (ABBV) Stack Up Against its Peers?

ABBV has an overall POWR Rating of A. One could also check out these other stocks within the Medical-Pharmaceuticals industry with an A (Strong Buy) rating: Johnson & Johnson (JNJ), Novartis AG (NVS), and Merck & Co. Inc. (MRK).

ABBV shares were trading at $140.82 per share on Thursday afternoon, down $0.62 (-0.44%). Year-to-date, ABBV has gained 6.97%, versus a -9.33% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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