Michael Vi
Elevator Pitch
AbbVie Inc. (NYSE:ABBV) describes itself as a “biopharmaceutical company” boasting “leadership positions across immunology, hematologic oncology, neuroscience, aesthetics, and eye care” in the company’s 10-K filings. ABBV recently announced the company’s fourth quarter and full-year 2022 earnings last Thursday prior to trading hours.
The company’s actual Q4 2022 earnings were above expectations. But AbbVie is still valued by the market at a lower P/E multiple as compared to its peers, as the company is only projected to deliver a low single-digit topline CAGR in the coming years. ABBV’s slower revenue growth expectations have already been baked into its valuations, which justifies a Hold rating for the stock.
What Were AbbVie’s Expected Earnings?
The market had expected AbbVie to grow its non-GAAP adjusted earnings per share or EPS by +16.2% YoY from $3.08 in Q4 2021 to $3.58 for Q4 2022, before the company disclosed its recent quarterly financial performance in the previous week.
ABBV didn’t disappoint Wall Street with its actual Q4 2022 financial results, as I will highlight in the next section.
Did AbbVie Beat Earnings?
AbbVie’s actual Q4 2022 normalized EPS was $3.60 as per the company’s quarterly results press release. This was equivalent to a +16.9% growth in the bottom line for ABBV on a YoY basis, and +0.6% higher than the sell-side analysts’ consensus earnings forecast referred to in the prior section. The company’s Q4 2022 bottom line also surpassed the mid-point of its EPS guidance ($3.53) by +2.0%.
The market responded favorably to ABBV’s fourth quarter EPS beat. AbbVie’s share price rose by +2.8% from $144.61 as of February 8, 2023 to $148.70 at the end of the February 9, 2023 trading day, which is the day of the earnings announcement. ABBV’s stock price went by another +2.2% on the subsequent day to close at $152.05 on February 10, 2023.
ABBV Stock Key Metrics
The key metrics for AbbVie are the company’s actual full-year FY 2022 normalized EPS and its earlier management guidance.
Non-GAAP adjusted EPS for ABBV increased by a decent +16.4% YoY from $11.83 for 2021 to $13.77 in the previous year. But AbbVie’s FY 2022 bottom still fell short of the company’s prior financial guidance.
AbbVie had reiterated the mid-point of its bottom line guidance ($13.86 per share) for 2022 when it reported its Q3 2022 financial results in late-October last year. However, ABBV’s actual normalized EPS for fiscal 2022 turned out to be -0.6% lower than what the company had previously guided for.
The company highlighted at its recent FY 2022 earnings call that the sales of its oncology drugs, “Imbruvica and Venclexta” didn’t get back to the same levels that were achieved prior to COVID-19. AbbVie also noted at the company’s most recent financial results briefing that it saw “additional share impact (i.e., market share loss)” for Imbruvica. This explains why AbbVie’s full-year 2022 earnings didn’t meet guidance.
The below-expectations performance of ABBV’s oncology products in 2022 also has implications for the company’s outlook, as detailed in the subsequent section.
What To Expect After Earnings
Post-Q4 2022 earnings, the revenue outlook for AbbVie isn’t favorable.
As per consensus financial data sourced from S&P Capital IQ, the sell-side sees ABBV’s revenue decreasing by -8.7% to $53 billion in FY 2023. The Wall Street’s consensus topline CAGR for AbbVie for the FY 2024-2027 period is a modest +3.8%. In comparison, the historical FY 2018-2021 revenue CAGR for ABBV was much higher at +18.7%.
The decline in revenue contribution from AbbVie’s oncology products is a key factor that contributes to the weak topline growth outlook for the company as a whole in the next few years. Revenue derived from ABBV’s oncology product portfolio decreased by -9% to $6,577 million in 2022. AbbVie guided at its Q4 2022 results call that it expects its oncology product sales to decline by another -13% to approximately $5,700 million for 2023.
At the earlier 41st Annual JPMorgan (JPM) Healthcare Conference held in January 2023, ABBV has acknowledged that “new competitive entrants has significantly lowered our sales expectations for Imbruvica.” That said, AbbVie did note at the recent JPM investor event that the moderation in revenue generated by Imbruvica could be “partially offset by the continued strong growth from Venclexta.”
Following the company’s recent Q4 2022 financial results disclosure, AbbVie is expected to register a more moderate pace of topline expansion in the next few years. But this seems to have already been priced into ABBV’s valuations.
The market currently values ABBV at 13.6 times consensus forward the next twelve months’ normalized P/E as per S&P Capital IQ’s valuation data. As a comparison, AbbVie’s peers, AstraZeneca PLC (AZN), Merck & Co., Inc. (MRK), Johnson & Johnson (JNJ), Regeneron Pharmaceuticals, Inc. (REGN), and Vertex Pharmaceuticals Incorporated (VRTX), are trading at higher consensus forward next twelve months’ normalized P/E multiples in the 15-20 times range.
Is ABBV Stock A Buy, Sell, Or Hold?
ABBV stock is a Hold. I view the company’s recent fourth quarter earnings beat favorably, but ABBV’s medium-term revenue growth outlook (consensus FY 2024-2027 topline CAGR of +3.8%) isn’t anything to shout about. AbbVie’s modest revenue growth expectations are factored into its valuations, with the stock trading at a discount to its peers based on the forward P/E valuation metric. As such, a Hold rating for AbbVie is fair.
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