A month has gone by since the last earnings report for AbbVie (ABBV Quick QuoteABBV - Free Report) . Shares have added about 0.9% in that time frame, outperforming the S&P 500.

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

AbbVie Beats on Q1 Earnings & Sales, Raises EPS View

First-quarter 2019 earnings of $2.14 per share beat the Zacks Consensus Estimate of $2.06. Earnings rose 14.4% year over year driven by higher sales and operating margins. Earnings per share were also better than the guided range of $2.05 and $2.07.

Revenues of $7.83 billion beat the Zacks Consensus Estimate of $7.75 billion. Sales decreased 1.3% on a reported basis. Excluding a 1.7% unfavorable impact from foreign exchange rate fluctuations, operational revenues rose 0.4% backed by higher sales of several products, which offset the impact of international biosimilar competition. Revenues were higher than the guided figure of approximately $7.7 billion.

Quarter in Details

Humira sales declined 5.6% (3.8% on an operational basis) to $4.4 billion.

Sales in the United States increased 7.1% to $3.22 billion, in line with the guidance, driven by strong demand trends. Humira sales in ex-U.S. markets were down 23% on an operational basis and 27.9% on a reported basis to $1.23 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 trends and dynamics were in-line with management expectations.

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.

AbbVie’s oncology/hematology (including Imbruvica and Venclexta) sales rose 43.2% to $1.17 billion in the quarter driven by strong growth of both Imbruvica and Venclexta. First-quarter net revenues from Imbruvica were $1.02 billion, in-line with the guidance, up 34% year over year. U.S. sales of Imbruvica grossed $829 million, up 32.8% from the year-ago figure primarily driven by continued uptake in the frontline CLL segment. AbbVie logged $193 million of international profit sharing with J&J, up 39.6% year over year.

Venclexta, brought in revenues of $151 million, up more than 100% year over year driven by continued uptake in the second-line plus setting following approval in the broad relapsed/refractory CLL segment (MURANO study) last year and the recent launch in first-line AML.

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 $815 million, down 11.3% (down 9.1% on an operational basis) year over year on lower sales of Mavyret as well as Viekira. In the United States, HCV revenues rose 17.3% to $403 million reflecting market share gains.

Mavyret accounted for $790 million in the quarter, down 6.9% (down 4.9% on an operational basis) year over year.

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 delivered an impressive performance include Duodopa. It recorded revenue growth of 14.4% on an operational basis and 8.3% on a reported basis. While Creon, which generates sales from U.S. markets, witnessed an increase of 8.6% in revenues, sales of Kaletra grew 10.9% and 6.9% on operational and reported basis, respectively.

Drugs that recorded sales decline include Androgel, Synagis and Sevoflurane, which fell 42.9%, 7% and 8.5%, respectively, operationally, during the quarter.

Margins Rise

Adjusted gross margin rose 310 bps to 83.3% in the quarter. Adjusted gross margin includes a 280 bps benefit due to low Humira royalties owed. Adjusted SG&A expenses decreased 6.4% to $1.56 billion. However, as a percentage of sales, SG&A expenses declined 100 bps to 20% in the quarter. R&D expenses rose almost 1% to $1.2 billion in the first quarter due to greater investments in the pipeline. Adjusted operating margin was 48.1% of sales in the reported quarter, up 400 bps year over year.

2019 Guidance

AbbVie raised its guidance for adjusted EPS based on a strong first-quarter performance and strong business momentum. Earnings are now expected in the range of $8.73-$8.83, up from the previous guidance of $8.65-$8.75 for 2019. The earnings guidance indicates a year-over-year increase of 11% 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 approximately 1%, compared to less than 1% expected previously.

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 approach 83% of sales in 2019, up from 82.5% expected previously.

Operating margin is expected to be just above 47%, an increase of roughly 250 basis points year over year. Previously, the operating margin was expected to be just above 46.5%, representing an increase of 200 bps.

While R&D is expected to be approximately 15.5% of sales, SG&A is expected to be approximately 20.5% of sales

Second-Quarter 2019 Outlook

Second-quarter earnings are expected between $2.20 and $2.22 per share. Revenues are estimated to be above $8.1 billion. Foreign exchange is expected to have approximately 1.5% unfavorable impact on sales in the quarter.

While U.S. Humira sales are expected to rise approximately 7%, international Humira sales are expected to be approximately $1 billion. Imbruvica is expected to record sales of approximately $1.1 billion.

Adjusted operating margin is expected to be similar to the first-quarter level of 48.1%, which is higher than the full-year expectation of just above 47%. This is because the company expects higher spending related to new product launches in the second half,.

In the second quarter, sales contribution from Skyrizi is expected to be modest. Skyrizi is expected to contribute approximately $150 million of sales in the second half of 2019. Orilissa sales are expected to be approximately $200 million in 2019.
 

How Have Estimates Been Moving Since Then?

Fresh estimates followed an upward path over the past two months.

VGM Scores

At this time, AbbVie has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

AbbVie has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.