Key Points
Adjusted EPS nearly doubled, but most of that comes from last year’s big research-deal charge, and underlying growth was closer to 17%.
Skyrizi and Rinvoq now account for nearly half of AbbVie’s revenue, which drives growth and concentrates risk.
At roughly 21 times forecast EPS, the stock already assumes continued growth, while a 5.2% dividend raise extends a long-standing inherited streak.
Losing patent protection on a blockbuster drug can be a disaster for a pharmaceutical stock. But AbbVie (NYSE:ABBV) has managed to move past the loss of exclusivity on Humira, once the world's best-selling drug, and continues to deliver impressive growth.
Investors have noticed. AbbVie stock closed at a record $290.79 just before its third-quarter earnings report before the market opened Oct. 30, then gained another 1.4% Friday to record another all-time high.
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At this lofty level, is AbbVie still a buy? The latest results offer some reasons to be optimistic.
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AbbVie's earnings at a glance
AbbVie posted third-quarter revenue of $17.4 billion, up 10.3% from a year ago. Adjusted earnings per share (EPS) was $3.82, beating the midpoint of management's guidance by about $0.07.
That's more than double the $1.86 per share reported a year earlier. But there's a catch.
Last year's results included $1.50 per share in expenses related to the acquisition of experimental drugs, compared with just $0.11 this year. Excluding those costs from both periods, adjusted EPS increased about 17%, from $3.36 to $3.93. That's still solid growth, but it's a more realistic picture of AbbVie's performance.
The biggest drivers are Skyrizi and Rinvoq, two immunology drugs that have more than replaced Humira as the company's growth engines.
Skyrizi revenue jumped 22.7% to $5.78 billion, while Rinvoq sales climbed 23.9% to $2.71 billion. Together, the drugs generated nearly $8.5 billion in revenue, accounting for 48.7% of AbbVie's total revenue. Meanwhile, Humira revenue fell to $683 million from $993 million a year ago.
A modest raise to guidance
AbbVie also raised its full-year outlook, although the increase was relatively small. Management guided to adjusted EPS in the range of $13.95 to $13.99, up from $13.76 to $13.96. It also increased its revenue guidance from $67.6 billion to $67.8 billion.
But the midpoint of its full-year earnings guidance increased by less than 1%. And the forecast excludes potential expenses from future research and development deals, which have affected reported earnings in recent quarters.
With AbbVie trading just under $300 at this writing, shares carried a forward price-to-earnings ratio of roughly 21. That's not an unreasonable valuation for a growing pharmaceutical company, but it leaves less room for disappointment. Management's 2027 guidance, expected with fourth-quarter results, will be particularly important.
Why the "Dividend King" label matters
AbbVie also announced a 5.2% dividend increase, raising its quarterly payout from $1.73 to $1.82 per share beginning in February. That brings its annual dividend to $7.28 per share, representing about 52% of the midpoint of its adjusted EPS forecast.
AbbVie is a Dividend King, a designation reserved for companies with at least 50 consecutive years of dividend increases. Technically, AbbVie inherited that record from Abbott Laboratories when the companies separated in 2013. But AbbVie has continued increasing its dividend since the spinoff, raising the payout by 355%.
That commitment is particularly attractive for income investors, especially after the company successfully weathered Humira's patent expiration.
AbbVie has demonstrated that it can replace a blockbuster drug and continue growing. Its dividend appears well-supported by projected adjusted earnings, and its newer treatments are delivering strong results.
I remain bullish on AbbVie's long-term prospects, although its current valuation makes the upcoming 2027 guidance especially important. The business is delivering. Investors just need to be careful how much they're willing to pay for that growth.
Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool has a disclosure policy.