AbbVie Q3 Preview: Humira Weakness Is A Given But Watch The New Drugs

AbbVie Inc. (NYSE:ABBV) is expected to report its FQ3 2023's earnings pre-market on Friday, October 27th. Analysts expect the company to report a (Non-GAAP) EPS of $2.88 on the back of $13.69 billion in revenue. Should AbbVie meet these expectations, it'd represent an EPS decline of 21% and revenue decline of 7.56%. While that does not please me as a long, it is on the expected lines with the Humira situation.

My previous coverage on AbbVie was in March this year when I rated the stock a "Buy", backed by its safe 4% dividend. Since then, the stock has lost about 1% (including dividends) compared to the market's 10% gain. With that background out of the way, let's preview AbbVie's upcoming Q3 report.

Surprisingly Strong Revisions Heading Into Q3 Report

Given the stock's recent price action (covered below) and the general focus on Humira's lost patent, I expected AbbVie to have more muted expectations heading into the Q3 report. However, 10/13 EPS revisions and 8/9 revenue revisions have been to the upside. Overall, since the beginning of the year, Q3's EPS projection have gone up about 5% to reach $2.88/share. Do analysts expect a surprise from the company or are they adjusting for previous excesses on the downside? I believe it is the latter.

Beat or Miss? Let's Toss A Coin

AbbVie has beaten EPS estimates 11 times in the last 12 quarters while revenue has been to the upside just 6 times in the same time period. This usually suggests that the company operated with discipline (AKA reducing expenses) when revenue was expected to be weak. However, as can be seen in the charts below, the beats and misses have been by very small margins. So, I am going to hold my cards close to my chest and not predict anything here but will just say the numbers are unlikely to surprise the market. The stock's price action post-earnings will come down to the market's overall mood and the company's tone, especially around the new drugs covered below.

Things To Watch

Based on this trend (QoQ and YoY growth across the board), it is safe to expect the two drugs to bring in well above $3 billion in combined revenue in the upcoming Q3 report.

Valuation

Weak Technical Indicators But Forming A Base

AbbVie's stock has struggled for a while now as the stock is down:

• Almost 9% YTD.
• 9% in the last 6 months, and
• 3.40% in the last month.

So, no wonder the stock's technical indicators are not too favorable as we head into the Q3 report with its Relative Strength Index [RSI] trending towards the oversold zone and the current price below all but the 100-Day moving average. However, the bright spot here is that the moving averages are in a very tight range between $144 and $150.

Conclusion

In my opinion, AbbVie's stock has been unfairly punished for a well-known cliff with Humira. The company's sales growth, minus Humira, was in the high single-digits in the most recent quarter and that's not bad for a stock trading at a forward multiple of 13 and yielding a safe 4%. I am looking forward to monitoring the growth in Global Skyrizi and Global Rinvoq revenue in Q3 and beyond. Venclexta is also showing strength in the market and as a result, in numbers, as it reported 13% growth in both Q1 and Q2 and should be monitored.

I am also looking forward to the company's 11th consecutive dividend increase soon (as a stand-alone company). Overall, I am retaining my "Buy" rating on the stock as I believe weaknesses like the present situation are to be taken advantage of by those with long term focus.