AbbVie (ABBV) Up 1.9% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for AbbVie (ABBV). Shares have added about 1.9% 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 drivers.

AbbVie Beats on Q4 Earnings & Sales

Fourth-quarter 2019 earnings of $2.21 per share beat the Zacks Consensus Estimate of $2.20 and came in higher than the company’s guided range of $2.17-$2.19. Earnings rose 16.3% year over year.

Revenues of $8.70 billion came in line with the Zacks Consensus Estimate. Sales rose 4.8% on a reported basis. Excluding currency headwinds of 0.5%, operational revenues increased 5.3%, driven by continued strong performance of AbbVie’s immunology and hematological oncology despite the impact of international biosimilar competition for Humira. Operational revenue growth was slightly ahead of the guidance of approximately 5%.

Quarter in Details

Humira sales were flat (up 0.5% on an operational basis) at $4.92 billion as higher U.S. sales were offset by decline in international markets.

Sales in the United States climbed 9.8% to $3.97 billion. However, Humira sales in the ex-U.S. markets were down 25.4% on an operational basis and 27.3% on a reported basis to $948 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 9% in United States. International Humira sales are expected to approach $3.4 billion in 2020.

New immunology drugs Skyrizi and Rinvoq registered sales of $216 million and $33 million, respectively. In the previous quarter, Skyrizi and Rinvoq recorded sales of $91 million and $14 million, respectively. Per the company, both Skyrizi and Rinvoq are off to an impressive start.

Regarding Rinvoq, on the call, the company said that the early uptake trends were robust and the medicine currently covers approximately 9% of in-play RA patients.

AbbVie expects Skyrizi and Rinvoq combined revenues of approximately $1.7 billion in 2020, higher than $1 billion expected previously. This includes Skyrizi global revenues of approximately $1.2 billion and Rinvoq global revenues of approximately $500 million.

AbbVie’s oncology/hematology (including Imbruvica and Venclexta) sales surged 37.2% on an operational basis to $1.55 billion in the quarter, driven by strong growth of both Imbruvica and Venclexta.

Fourth-quarter net revenues from Imbruvica were $1.3 billion, up 28.9% year over year. U.S. sales of Imbruvica grossed $1.07 billion, up 28% from the year-ago figure, driven by strong share in all lines of therapy in CLL. AbbVie logged $223 million of international profit sharing with J&J (NYSE:JNJ), up 33.8% year over year.

Venclexta brought in revenues of $251 million, up more than 100% year over year driven by continued share gains across all approved indications.

In 2020, Imbruvica global revenues are expected to be approximately $5.5 billion while Venclexta global sales are expected to be approximately $1.3 billion

HCV products, including Viekira and Mavyret, recorded sales of $632 million, down 26.7% (down 26.4% on an operational basis) year over year on lower sales of Mavyret as well as Viekira. In the United States, HCV revenues declined 25.1% to $306 million. International HCV revenues declined 27.6% on an operational basis to $326 million.

Mavyret sales totaled $628 million in the quarter, down 23.4% (down 23.1% on an operational basis) year over year due to a decline in the United States as well as international markets. International sales of Mavyret declined 20.8% in the third quarter on an operational basis due to lower treated patient volumes in some markets. U.S sales were down 5.4% year over year due to increased competition in management Medicaid segment.

Other products that delivered an encouraging performance include Duodopa. It recorded revenue growth of 7.1% on an operational basis to $118 million. Creon witnessed an increase of 11.5% in revenues to $292 million. Drugs that recorded sales decline include Synthroid, Lupron, Synagis, Androgel, Kaletra and Sevoflurane. Creon and Synthroid generate sales only from U.S. markets.

Newly launched drug Orilissa recorded sales of $34 million, entirely from the U.S. market versus $27 million in the previous quarter. The sales ramp up of the drug has been slower than expected.

Margins Rise

Adjusted gross margin rose 180 bps to 81.6% in the quarter. Adjusted gross margin included benefit due to low Humira royalties owed. Adjusted SG&A expenses increased 4.8% to $1.9 billion. R&D expenses were $1.33 billion in the fourth quarter, sliding 2.8% year over year due to greater investments in the pipeline. Adjusted operating margin represented 44.6% of sales in the reported quarter, up 290 bps year over year.

2019 Results

Full-year 2019 sales rose 1.6% to $33.27 billion. Sales were up 2.7% on an operational basis, slightly above the guidance range of approximately 2.5% growth.

Adjusted earnings for 2019 of $8.94 per share were above the guided range of $8.90-$8.92. Earnings rose 13% year over year.

2020 Outlook

AbbVie expects adjusted EPS to be in the range of $9.61-$9.71 for 2020 for the standalone company, which means excluding Allergan (NYSE:AGN). The earnings guidance indicates a year-over-year increase of 8.1% at the mid-point.

The company also expects standalone revenue growth to approach 8% on an operational basis. Currency headwinds are expected to have a minimal impact on reported sales growth in 2020.

Adjusted gross margin is expected to be approximately 81.5% of sales in 2020. Operating margin is expected to be approximately 48% of sales. While R&D is expected to be slightly above 14% of sales, SG&A is expected to be above 19% of sales

First-Quarter 2020 Outlook

First-quarter earnings are expected between $2.28 and $2.30 per share. Operational sales growth is expected to be approximately 7%.

U.S. Humira sales are expected to be approximately $3.5 billion while international Humira sales are expected to be approximately $900 million. Imbruvica sales are expected to approach $1.2 billion. For Skyrizi, global sales are expected to be approximately $250 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, AbbVie has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, AbbVie has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.