It has been about a month since the last earnings report for AbbVie (ABBV Quick QuoteABBV - Free Report) . Shares have lost about 6.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is AbbVie due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

AbbVie Q4 Earnings & Sales Miss, Humira Ex-U.S. Sales Decline

Fourth-quarter 2018 earnings of $1.90 per share missed the Zacks Consensus Estimate of $1.92. Earnings rose 28.4% year over year driven by higher sales, share repurchases and lower tax. Earnings per share were within the guided range of $1.89 and $1.91.

In the quarter, AbbVie recorded an impairment charge of $2.75 per share on assets from the 2016 acquisition of Stemcentrx due to recent Rova-T clinical setbacks. Including this charge, loss per share was $1.23 per share against earnings per share of 3 cents in the year-ago quarter.

Revenues of $8.31 billion missed the Zacks Consensus Estimate of $8.36 billion. Sales rose 7.3% on a reported basis. Excluding a 1% unfavorable impact from foreign exchange rate fluctuations, operational revenues rose 8.3% backed by higher sales of Humira in U.S. market and its hematological/oncology products, Imbruvica and Venclexta. Operational revenue growth was better than the expectation of approximately 7%.

Quarter in Details

Humira sales rose 0.5% (1.4% on an operational basis) to $4.9 billion.

Sales in the United States increased 9.1% to $3.6 billion driven by strong prescription volume growth and favorable pricing. Humira sales in the ex-U.S. markets were down 14.8% on an operational basis and 17.5% on reported basis to $4.92 billion.

International sales were severely impacted by the launch of several direct biosimilar drugs in Europe and other international markets. On the call, the company said that biosimilar competitors are giving more aggressive discounts than AbbVie anticipated, which severely hurt international sales.

In the U.S. market, Humira sales are expected to rise approximately 7% in 2019, which is less than growth of 10% in 2018 due to lighter price contribution for the year. In 2019, international Humira sales are expected to decline approximately 30% on an operational basis, a sharper decline that previous expectation of a range of 26-27%.

AbbVie’s oncology/hematology (including Imbruvica and Venclexta) sales rose 50.2% to $1.13 billion in the quarter. Fourth-quarter net revenues from Imbruvica were $1 billion, up 42% year over year. U.S. sales of Imbruvica grossed $839 million, up 43.2% from the year-ago figure primarily driven by continued uptake in the frontline CLL segment. AbbVie logged $167 million of international profit sharing with J&J, up 36.4% year over year.

Venclexta brought in revenues of $124 million, up more than 100% year over year driven by uptake in the second-line plus setting following approval in the broad relapsed/refractory CLL segment (MURANO study) in June.

In 2019, Imbruvica global revenues are expected to approach $4.4 billion with sales in the United States growing approximately 21%. Venclexta sales are expected to be approximately $725 million. Total global oncology/hematology sales are expected to be approximately $5.1 billion.

HCV products, including Viekira and Mavyret, recorded sales of $862 million, up 69.3% year over year, on the back of strong demand for Mavyret, which was launched in the second half of 2017.

Mavyret alone accounted for $819 million in the quarter, up more than 100% year over year driven by rapid uptake. On the call, the company said that Mavyret continue to command roughly 50% market share globally.

In 2019, global HCV sales are expected to be higher than $3.3 billion with roughly flat performance in the United States and international sales of approximately $1.7 billion.

Other products that performed well include Lupron ($236 million, up 5.3% year over year), Creon ($261 million, up 11.4%), Duodopa ($113 million, up 14%) and Synthroid ($209 million, up 2%). Sales of Synagis, AndroGel, Sevoflurane and Kaletra declined in the quarter.

Regarding, newly launched Orilissa, AbbVie said the early launch was impressive with demand expected to ramp up given recent increased formulary access, which stands at approximately 70%. Orilissa sales are expected to be approximately $200 million in 2019.

Margins Rise

Adjusted gross margin rose 80 bps to 79.8% in the quarter. Adjusted SG&A expenses increased 9.2% to $1.8 billion. As a percentage of sales, SG&A expenses rose 30 bps to 21.6% in the quarter. R&D expenses rose 3.1% to $1.37 billion in the quarter due to greater investments in the pipeline. Adjusted operating margin was 41.7% of sales in the reported quarter, up 100 bps year over year.

Both gross and operating margins declined sequentially in the quarter.

2018 Results

Earnings per share were $7.91 for full-year 2018, up 41.3% year over year and within the guided range of $7.90-$7.92.

Full-year 2018 revenues were $32.73 billion, up 16% year over year. Revenues were in line with management’s expectation of approaching $32.7 billion. Revenues were up 15.2% on an operational basis, in line with expectations.

2019 Guidance

AbbVie expects adjusted EPS to be in the range of $8.65-$8.75 for 2019. The earnings guidance indicates a year-over-year increase of 10% at the mid-point.

Revenues are expected to grow approximately 1% on an operational basis in 2019. Currency headwinds are expected to hurt 2019 revenues by less than 1%.

In 2019, AbbVie expects roughly $2 billion of erosion related to international biosimilar competition to Humira. In addition, it expects a $400 million headwind from generic competition to AndroGel in 2019. Also, costs to support expected launches of five new products and line extensions should put pressure on margins. However, these new products will be at early stages of their launch trajectory in 2019 and will not be a significant offset to international biosimilar impact. However, AbbVie believes the products will grow over the next few years and provide significant offset to the 2023 U.S. biosimilar event.

In 2019, AbbVie believes that the loss of international Humira revenues will be made up for by U.S. Humira and hematological oncology franchise growth.

Adjusted gross margin is expected to be above 82.5% of sales in 2019. While, R&D is expected to be approximately 15.5% of sales, SG&A is expected to be approximately 20.5% of sales

Operating margin is expected to be just above 46.5%, an increase of roughly 200 basis points year over year.

On the fourth-quarter call, the company said it is not contemplating any large M&A deal.

First-Quarter 2019 Outlook

First-quarter earnings are expected between $2.05 and $2.07 per share. Revenues are estimated to be approximately $7.7 billion. Foreign exchange is expected to have approximately 2% unfavorable impact on sales in the quarter.

While U.S. Humira sales are expected to be approximately $3.2 billion, international Humira sales are expected to be approximately $1.2 billion. Imbruvica is expected to record sales of approximately $1 billion.

While adjusted gross margin ratio is expected to be in line with full-year guidance of 82.5%, costs are expected to be higher in the first quarter relative to the full year due to the timing of the spending.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, AbbVie has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

AbbVie has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.