High-Yield AbbVie Gains Momentum: A 20% Upside Is in Sight

Key Points

• AbbVie had a solid quarter and guided higher, leading analysts to raise targets and the market to set a new high. 
• The forecasts for 2025 are cautious and likely to be raised as the quarter progresses. 
• The capital return is solid, yielding above average for S&P 500 companies and Dividend Aristocrats. 

The story with AbbVie NYSE: ABBV in 2024 is that it fell off a patent cliff but survived. It survived and continues to thrive because of its strengths in its core immunology portfolio and diversification efforts. While Humira sales continue to flag, falling more than expected in Q3, sales of Rinvoq and Skyrizi are ramping and more than make up the difference. Sales in other segments, including oncology and neurology, also underpin the pharmaceutical company’s growth and are expected to remain strong, if not accelerate, in 2025. 

AbbVie's 2024 pipeline highlights include more than 90 treatments under study, more than a dozen in Phase III trials, and acquisitions including Cerevel and Aliada. Cerevel and Aliada bolster the neurosciences portfolio, improving research capability and the pipeline of candidates. Aliada’s primary candidate is a potential best-in-class treatment for Alzheimer's, a nearly $5 billion industry expected to double over the next eight to ten years. 

AbbVie Has Strong Quarter, Raises Guidance: Expect Another Raise at Quarter End

AbbVie had a strong quarter in Q3 despite the weakness in Humira. The company reports $14.46 billion for a 3.8% year-over-year (YoY) gain, outpacing the consensus by 120 basis points. Immunology, the largest segment, grew by 4.8%, led by a 13% increase in Oncology sales and a stronger 15.6% in Neuroscience. Aesthetics, which includes Botox Cosmetic, declined slightly but is only a low-single-digit influence on revenue. Within Immunology, Humira sales fell by 37%, offset by a 50% increase in Skyrizi and a 47% gain in Rinvog. Skyrizi sales have already eclipsed Humira’s, and Rinvoq is on track for the same in 2025. 

Margin news is also good. The company was able to sustain a strong margin and grow earnings compared to last year despite the impact of acquired In-Process Research and Development (IP&RD) and milestone expenses. The net result is $3.00 in adjusted earnings, up 1.7% compared to last year and 270 basis points better than the forecast. The takeaway is that the company’s financial health is excellent and improving, with profitability above target and momentum in the operational business and pipeline expected to sustain its strengths.

The guidance is good. The company raised its forecast for adjusted diluted earnings per share (EPS) to a range above the prior high-end and the analysts' targets. Due to operational momentum, investors can expect the guidance for 2025 to come in strong and above the current consensus. As it is, the analysts forecast revenue growth to accelerate to a mid-single-digit gain in F2025 and earnings growth at double the pace. 

Analysts Lift Estimates After AbbVie Releases Q3 Results

The analysts' response to AbbVie’s Q3 results and guidance favor higher share prices. 100% of the revisions tracked by MarketBeat.com include a higher price target, and 100% of them are above $200. The result is an overnight rise in the consensus estimate to over $200, suggesting the market is fairly valued following the release-inspired rally. However, the revision trend is bullish, with recent targets putting this market near $230 or more than 10% higher, at the high-end range. 

Capital return is part of why analysts like AbbVie. Its operational quality and long-term growth trajectory support a solid dividend distribution worth more than 3.2%, with shares trading near the $201 analyst consensus price target. That is more than double the broad-market average and at the high-end range for Dividend Aristocrats, who average closer to 2.5%. A move to align AbbVie’s yield with that of other aristocrats is worth more than 50% upside. 

AbbVie Breaks Out to New High

AbbVie’s price action following the Q3 release is bullish. The market advanced 7% for the day, reaching a new all-time high on increased volume. Volume and price have been steady for two days, suggesting the move will stick. The indicators are also favorable, aligning with an uptrend with ample upside potential. The simple technical targets range from $212 to $220, aligning with the analysts' revisions.