Can AbbVie (ABBV) Sustain Earnings Beat Trend In Q3?

We expect pharma company AbbVie Inc. (NYSE:ABBV) to beat expectations when it reports third-quarter earnings results on Oct 28 before market open. AbbVie had delivered a positive earnings surprise of 5.00% in the second quarter.

AbbVie’s performance has been pretty impressive, with consistent positive surprises. The average earnings beat over the last four quarters is 3.32%.

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

Factors at Play

At the second-quarter conference call, management had said that it expects third-quarter earnings in the range of $1.18 to $1.20 per share. Revenues were guided to see high single-digit operational growth, excluding a modest negative foreign exchange impact.

Key drug Humira should remain the main growth driver in the third quarter. Growing awareness, strong underlying demand, favorable clinical data, additional indications and market share gains should help the product to continue contributing significantly to the top line.

However, a factor to be considered for international Humira sales is the impact of Remicade and Enbrel biosimilars.

Another area of focus is the performance of Imbruvica which was added to AbbVie’s portfolio following its May 2015 acquisition of Pharmacyclics. Imbruvica has multi-billion dollar potential that the company is exploring to expand Imbruvica’s label into solid tumors and autoimmune diseases.

The drug recorded strong sales and share gains in the second quarter, a trend we expect to continue.

AbbVie is positioning Imbruvica as a “pipeline in a molecule” -- a treatment that is currently used in a wide range of studies. Imbruvica is partnered with Johnson & Johnson (NYSE:JNJ) , which recorded third-quarter Imbruvica sales of $349 million.

Other drugs like Duopa and Creon should also do well in the quarter to be reported.

However, Abbvie’s Hepatitis C virus (HCV) treatment, Viekira, will continue to be impacted by the addition of liver injury warnings to the labels of AbbVie’s HCV treatments as well as new competition in the market.

What Our Model Indicates

Our proven model shows that AbbVie is likely to beat on earnings because it has the right combination of the two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.83%. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of ABbVie’s Zacks Rank #3 and +0.83% ESP makes us confident in looking for an earnings beat in the upcoming release.

Other Stocks to Consider

Some other stocks in the large-cap healthcare sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Amgen Inc. (NASDAQ:AMGN) , which is scheduled to report results on Oct 27. The company has an Earnings ESP of +1.08% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Novartis AG (NYSE:NVS) with an Earnings ESP of +2.54% and a Zacks Rank #3. The company is scheduled to release results on Oct 25.

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