AbbVie Price Action Implodes On Revised Guidance
Price action in AbbVie (NYSE: ABBV) imploded following the Q1 results in what we are viewing as a knew-jerk reaction and a buying opportunity. The company reported good results, slightly below consensus on the top line, and lowered its guidance due to costs related to acquired IP. The costs are unexpected but won’t recur this year and are tied to future sales (we assume) so aren’t the red flag they could be. We assume this is why Wells Fargo upped its price target for the stock and to the new Wall Street high. Wells Fargo didn’t issue a rating with the target but has the stock pegged at $200 or about 36% above the Pricetargets.com consensus.
The Pricetargets.com consensus rating on the stock is a firm Buy and that has held steady over the past year. The consensus price target is near $160 and assumes about 20% of upside for the stock. The consensus has been trending higher over the past 12 months, 3 months, and 1 month period so we are expecting to see it continue higher in the near to mid-term at least. The consensus target is well below the all-time high, however, but the Wells Fargo target is not. That target has the stock trading well into new all-time high territory.
AbbVie Has Mixed Quarter, Margins Widen
AbbVie had a good quarter in which revenue grew by 4.1%. This is good news but the $13.54 billion fell short of the consensus by 50 basis points which is a slim margin we know. Revenue strength was driven by most segments with only the Hematologic segment posting decline. Aesthetics led with a growth of 20% followed by 19.2% in Neuroscience and 6.9% in Immunology.
The good news, the silver lining for us, is that margins widened and led to outperformance on the bottom line despite topline weakness and the aforementioned impacts of IP spending. On the bottom line, the company reported $3.16 in adjusted EPS which is up 26.1% from last year and beat the consensus by $0.02. The impact of IP spending came in at $0.08 per share.
The problem for the market is the guidance which was lowered. The company lowered the outlook for adjusted EPS by $0.08 at the top and bottom end of the range putting it slightly below the consensus. For us, not only is IP spending a good thing for a company like Abbvie but it is also outperforming on the bottom line so we see not only potential for the company to outperform expectations but for future results to be positively impacted as well.
"This year is off to a strong start. Our first-quarter results highlight the diversity of our portfolio and include a compelling performance from key growth drivers Skyrizi, Rinvoq, Aesthetics and Neuroscience," said Richard A. Gonzalez, chairman, and chief executive officer, AbbVie. "Our momentum combined with ramping contributions from new products and new indications will drive accelerating revenue and EPS growth through the rest of the year."
The Technical Outlook: AbbVie Falls To Support
Shares of AbbVie corrected and pulled back to support over the past few weeks and they may fall further. The caveat for bears is that support is still present above the 150-day moving average and institutional buying has been strong. The institutions bought more than 3.2% of the market cap over the past year and now own more than 67% of the stock. We expect to see their buying pick up again now that price action is back at more reasonable levels. AbbVie is also a high-yield value at 3.85% yield and 10.4X its earnings.
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