AbbVie (ABBV) Set To Report Q2 Earnings: What To Expect

AbbVie (NYSE:ABBV) is set to release its Q2 earnings before market open on Friday. AbbVie stock has performed very poorly YTD, falling 26%.

Overview

AbbVie Inc. is an American biopharmaceutical company based in Illinois. AbbVie was established as a spin-off of Abbott Laboratories (NYSE:ABT) in 2013. AbbVie is the marketer and producer of Humira, the best-selling drug in the world. Humira is used to treat rheumatoid arthritis, Crohn’s disease, ulcerative colitis, and other issues related to these diseases.

AbbVie has also made a couple of acquisitions over the past couple of months. In June, AbbVie acquired Botox-producer Allergan (NYSE:AGN) plc for $63 billion. In July, AbbVie announced it would acquire Mavupharma, which would help bolster the company’s cancer drug pipeline.

Since the Allergan acquisition announcement, ABBV stock has fallen 13%. Currently, AbbVie shares are trading at 7.39 times earnings, which may make the stock seem undervalued compared to its industry’s average P/E of 14.37. However, ABBV’s lower P/E is most likely due to its falling stock price in recent months and may not be a good representation of the stock’s value.

Additionally, AbbVie is a solid dividend stock. Since November 2017, AbbVie has increased its dividend three times, the most recent being an 11% increase that came in February 2019. The annual dividend is currently at $4.28, which amounts to a dividend yield of about 6.2%.

Q2 Outlook & Earnings Trends

Revenues for Q2 are expected to fall 2% year-over-year from $8.28 billion to $8.10 billion, according to our Zacks Consensus Estimates. After years of year-over-year revenue growth, predictions suggest this will be the second quarter in a row of shrinking revenues.

In Q1, revenues fell 1.3% from Q1 2018. The primary source of the revenue decline was a decrease in international sales. International sales of Humira declined by nearly half a billion dollars, or over 25%. Humira accounts for over 50% of AbbVie’s revenue, so investors are clearly worried about the firm’s overreliance on the drug.

Our Zacks Key Company Metrics predict international Humira sales will slip by a similar amount again for Q2. While U.S. sales are expected to increase slightly, from $3.521 billion in Q2 2018 to $3.785 billion. But this growth is simply not enough to make up for the expected international revenue decrease from $1.664 billion to $1.028 billion. The decrease in international Humira sales is a result of competition in Europe.

Meanwhile, AbbVie’s earnings are expected to grow by 10.5%. The quarterly growth will help contribute to an expected fiscal 2019 growth of 11.5%, which would give fiscal EPS of $8.82 compared to $7.91 in 2018.

Bottom Line

Humira’s patent in the U.S. expired in 2016, but domestic competitors are not expected to hit the market until 2023 due to AbbVie’s strong and persistent litigation leading up to the patent expiration. Until then, AbbVie needs to continue to grow its portfolio and the addition of Botox was a big one as it can help make up for some of the revenue that will be lost to Humira competitors. The firm’s international competitors have already taken a large toll on AbbVie’s revenue. And the arrival of domestic competitors will most likely have an even more significant impact on the company.

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