AbbVie (NYSE: ABBV) was among the pharma companies worst positioned for a patent cliff that has come and gone. However, management's lean toward diversifying away from Humira and into a broader range of treatments has more than paid off. The takeaway is that growth is back in the immunology portfolio despite the 30% contraction in Humira sales and accelerating across the system. 

The results for Q2 were much better than expected, including a positive guidance revision and a reaffirmed outlook for long-term revenue growth that resonates with the analysts.  Analysts applaud AbbVie’s Q2 results, citing portfolio quality and the pipeline in the numerous revisions issued after the release. The critical detail is that the Moderate Buy rating is unwavering, and the price target is rising. The consensus price target offers only a small 2% gain for investors, but it is up 5% in the week following the report and 10% compared to last year, leading this market to a new high. The range’s high-end is $214, which could be reached by early 2025.

AbbVie Accelerates Growth on Ramping Sales of Key Treatments

AbbVie had a good quarter, producing $14.46 billion in net sales. Revenue is up 4.2% compared to last year, and growth is accelerating sequentially, outpacing the consensus by 300 basis points. All segments contributed to the gain, led by a 14.7% increase in Neurosciences. Oncology, another area of strength, advanced by 10.5%, while Immunology gained 2.3%. Aesthetics, which includes Botox Cosmetic, grew by 0.5% and all aided margin. Within Immunology, which is almost 50% of the business, sales of Rinvoq and Skyrizi are strong, up 55% and 45%, respectively, and more than offset the loss of Humira revenue. 

The margin news is mixed but favorable to investors. The company widened its gross and operating margin on a GAAP and adjusted basis but fell short of the consensus. The GAAP and adjusted earnings are down compared to last year due to one-offs that include increased R&D and milestone expenses, while adjusted earnings are up. The salient detail is that adjusted earnings missed the consensus by a slim $0.01 margin, leaving cash flow and the capital return healthy. 

The company's guidance is favorable. It raised its guidance for adjusted EPS to a range bracketing the consensus. As-expected guidance isn’t usually a catalyst for higher share prices, but the revisions trend suggested analysts feared the worst. Regarding the pipeline, AbbVie announced numerous advances during the quarter, including FDA approval of Epkinly and advances in several oncology programs. 

AbbVie Capital Returns Provide Value for Pharma Investors

AbbVie’s dividend is attractive within the pharmaceutical universe because it is among the highest payouts, even with shares trading at record levels and reliable. The only drawback is that the payment is at the low end of its historical range, but the outlook for distribution growth offsets that. AbbVie is counted as a Dividend Aristocrat due to its history with Abbott Laboratories and is positioned to continue raising for another twenty-five years. Whether or not the yield is lower than average, steadily increasing distribution payments is a force that will support higher share prices over time.

The dividend payout is less than 60% of the earnings, with earnings growth expected to return in Q1 2025, if not by the end of F2024, so the pace of increases may accelerate. AbbVie also buys back stock. Repurchases are ramping higher in 2024 after a pause in 2023 and are on track to reduce the share count by year’s end. 

Bullish Price Action for AbbVie Following Release

The price action following the release is bullish. The market rose 7.5% the week of the release and is now consolidating near the high, a fresh all-time high set with a bullish trend-following movement. Rising EMAs, bullish signals in the MACD, and stochastic indicators compound the action. They suggest upward momentum will continue to carry the market higher. Shares of ABBV could rise as much as $25 to $30 in this scenario and reach the $210 level by January 2025.