AbbVie (NYSE: ABBV) is a stock that has recently made its way to investors' watchlists. The company is due to announce its earnings this week, and it has already made quite a stir due to changes in its fundamentals. MarketBeat reported that the company had tripled its dividend to $1.41 in the last decade, as well as trading at what could be seen to be a fair valuation. In this article, we will cover the other elements of ABBV that make up its strengths and weaknesses.
Market-Beating Momentum and Profitability Metrics
One factor that plays into the bull case of investing in ABBV is that the company is very profitable on an absolute basis compared to its sector median. The company has a gross profit margin of 69.68%, while the sector median is 55.18%. Other margins for the comp company have an even greater difference from the sector median. ABBV's levered FCF margin is one of them, as it is 34.12% compared with the sector's negative -1.87%.
Another reason to be bullish on the stock is that it is beating the S&P 500 for returns to shareholders across numerous timeframes and its peer companies in its sector. The price return of the stock over the last five years is 110.72%, while the S&P 500 delivered only 62.54%. The company is also beating the S&P 500 YTD, up 11.63%, and the index delivered a negative return of -15.58%. ABBV is beating its peers by a convincing margin on a YTD basis, as it's up 28.08% while the sector contracted -by 51.77%.
Growth and Negative Revision Headwinds
Despite some metrics for the stock being very competitive, there are some clear weaknesses of the stock that could be seen as the reason for its steep discounting. One of the company's most bearish metrics is the long-term projected growth of its EPS on a 3-5 year CAGR. This figure stands at 2.32%, and the sector median is 12.30%. On a relative basis, the company could also be seen to be relatively less efficient in transforming assets into profits for its shareholders through its projected negative ROE growth. This figure is currently -22.56%, and the sector median is 1.14%.
A number of analysts have downgraded the company's EPS and revenue estimates. 18 analysts downgraded their EPS targets, and 15 analysts downgraded their revenue targets. Despite these revisions, the consensus on Wall St is that the company is a buy. 10 analysts currently rate the company as a strong buy, while 4 analysts rate it simply a buy.
AbbVie Inc Vs. Amgen Inc
Amgen Inc (NASDAQ: AMGN) makes a worthy comparison to ABBV as they are both leading biotech stocks. AMGN is a smaller player in the space as its market cap is 134.16B, while ABBV has a market cap of 266.60B. The YTD return of the companies is similar, with ABBV delivering a return of 14.81% and AMGN 12.85%. Zooming out to the last five years, there is a considerable difference between the companies. Over the last five years, ABBV delivered 164.95% and AMGN 68%.
Both companies have strong dividends. AMGN's dividend is $7.40 with an FWD yield of 3.09%. ABBV has an FWD yield of 3.74% and a dividend of $5.53. The peers also have similar consecutive years of dividend growth of 9 and 10 years for ABBV and AMGN, respectively.
