With the 2% inflation rate targeted by the Federal Reserve still somewhat distant, the odds are high that, like last year, the economy and the markets would remain plagued by high borrowing costs and asset price deflation.
However, AbbVie Inc. (ABBV) looks well-placed to distinguish itself as one of the few valuable exceptions. The biopharmaceutical company develops, manufactures, commercializes, and sells medicines and therapies worldwide.
ABBV’s products are segmented into seven categories: Immunology; Oncology; Anaesthetics; Neuroscience; Eyecare; Women’s Health; and Others.
On October 28, ABBV announced a 5% increase in its quarterly cash dividend from $1.41 per share to $1.48 per share, beginning with the dividend payable on February 15, 2023.
A. Gonzalez, chairman and chief executive officer of ABBV, said, “Based upon our performance and confidence in AbbVie's long-term outlook, we are once again meaningfully raising our dividend.”
ABBV’s stock is currently trading above its 200-day moving average of $150.42. The stock has gained marginally over the past six months and 15% over the past year to close the last trading session at $153.60.
Let’s closely examine the factors that make it a worthwhile investment this year.
Stellar Track Record
Over the past three years, ABBV’s revenue has grown at 20.7% CAGR. During the same period, the company’s EBITDA and net income have also increased at CAGRs of 24% and 60.3%. The company’s EPS has grown at 51% CAGR.
ABBV has also grown its total assets at a 33.5% CAGR over the past three years.
Robust Financials
ABBV’s worldwide net revenues increased 3.3% year-over-year to $14.81 billion in the third quarter that ended September 30, 2022. During the same period, the company’s adjusted net earnings increased 29.1% from the year-ago value to $6.53 billion, while its adjusted EPS rose 29.3% from the prior-year quarter to $3.66.
Excellent Asset Utilization by Management
ABBV’s trailing-12-month gross profit margin of 69.8% is 26.4% higher than the industry average of 55.2%. The company’s trailing-12-month EBITDA and net income margins of 51.54% and 23.19% also stand out in stark contrast to the industry averages of 3.55% and negative 5.94%, respectively.
ABBV’s trailing 12-month ROCE, ROTC, and ROTA of 90.33%, 14.91%, and 9.49% are also significantly above the negative industry averages of 40%, 22.1%, and 31.1, respectively.
Favorable Analyst Estimates
Analysts expect ABBV’s revenue and EPS for the fiscal ended December 2022 to increase by 3.9% and 9% year-over-year to $58.30 billion and $13.84, respectively.
Moreover, the company’s impressive earnings surprise history has seen it beat Street EPS estimates in each of the trailing four quarters.
Attractive Valuation
In terms of forward non-GAAP P/E, ABBV is currently trading at 11.10x, 43.5% lower than the industry average of 19.62x. The stock’s forward EV/EBITDA multiple of 10.53 is 22.5% lower than the industry average of 13.59. Also, its forward Price/Sales multiple of 4.66 compares to the industry average of 4.78.
Consistently Increasing Dividend Payouts
ABBV’s forward annual dividend of $5.92 per share yields 3.85% at the current price. Its 4-year average dividend yield is 4.62%.
ABBV’s strong commitment to returning cash to shareholders is reflected through its growing dividend payouts. Its dividend payouts have grown at 16.9% CAGR over the past five years.
Since ABBV's inception in 2013, it has increased its quarterly dividend by 270%.
POWR Ratings Reflect Stellar Prospects
ABBV’s overall A rating translates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ABBV has an A grade for Quality in sync with its sector-beating profitability.
In addition, the stock has a B grade for Growth, in sync with its robust financials, enviable track record, and favorable analyst estimates. Also, its attractive valuation multiples have earned it a B grade for Value.
ABBV ranks #7 of 167 stocks in the Medical - Pharmaceuticals industry.
Click here to see additional POWR Ratings for Sentiment, Stability, and Momentum for ABBV.
Bottom Line
On January 10, ABBV and Anima Biotech announced a collaboration to discover and develop mRNA biology modulators for three targets across Oncology and Immunology. This followed the company’s December 6 announcement that it has entered into a worldwide collaboration and option agreement with Immunome, Inc. (IMNM) to discover up to 10 novel antibody-target pairs arising from three specified tumor types.
In conjunction with ABBV’s solid financials, discounted valuation, high profitability, and promising growth prospects, these positive recent developments position the company for stable risk-adjusted returns during the year ahead.
How Does AbbVie Inc. (ABBV) Stack up Against Its Peers?
ABBV has been rated A, equating to a Strong Buy. Check out these other stocks within the Medical – Pharmaceuticals industry with an A (Strong Buy) rating: Johnson & Johnson (JNJ), Pfizer Inc. (PFE), and Bristol-Myers Squibb Co. (BMY).
ABBV shares were unchanged in premarket trading Monday. Year-to-date, ABBV has declined -4.05%, versus a 4.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
The #1 Pharma Stock to Buy in January 2023 StockNews.com
