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Looking for Passive Income? Try This Monster Stock

Leading biopharmaceutical company AbbVie Inc. (ABBV) is well-positioned to benefit from its diversified portfolio, research breakthroughs, drug and therapy approvals, acquisitions, and partnerships. The company has been increasingly paying dividends, supported by its stable earnings stream. Therefore, investors looking for passive income amid uncertain market conditions could invest in this stock. Keep reading…

AbbVie Inc. (ABBV) is a research-based biopharmaceutical company that develops, manufactures, and sells pharmaceuticals worldwide. The company witnessed strong momentum for its key immunology assets, Skyrizi and Rinvoq. This performance, combined with continued strength in its diverse portfolio, has helped the company mitigate the impact of the economic headwinds and deliver solid results in the third quarter.

ABBV’s steady performance has allowed it to raise its dividend payments consistently over the past nine years. ABBV’s board of directors recently declared an increase in its quarterly cash dividend from $1.41 per share to $1.48 per share, payable on February 15, 2023. This reflects an increase of nearly 5%.

ABBV pays a $5.92 per share dividend annually, which translates to a 4.10% yield on the current price. Its four-year dividend yield is 4.65%. Its dividend payouts have grown at a CAGR of 9.6% over the past three years and 17.3% over the past five years.

Shares of ABBV have gained 6.7% year-to-date and 22.8% over the past year to close the last trading session at $144.52.

Here is what could influence ABBV’s performance in the upcoming months:

Recent Positive Developments

On October 22, ABBV announced that the U.S. Food and Drug Administration (FDA) approved RINVOQ®, an oral therapy, for the treatment of adults with active non-radiographic axial spondyloarthritis (nr-axSpA) with objective signs of inflammation who have had an inadequate response or intolerance to tumor necrosis factor (TNF) blocker therapy. This FDA approval marks the sixth indication for RINVOQ® in the United States across chronic immune-mediated diseases.

In the same month, ABBV acquired DJS Antibodies Ltd, a privately held UK-based biotechnology company involved in discovering and developing antibody medicines that target difficult-to-drug disease-causing proteins, such as G protein-coupled receptors (GPCRs).

“This acquisition will deliver new capabilities to enhance our current antibody research activities, an opportunity to strengthen our immunology portfolio, and provide a strong foothold for expanded research efforts in the dynamic bioscience hub in Oxford, UK,” said Jonathon Sedgwick, Ph.D., ABBV’s vice president and global head of discovery research.

Robust Financials

ABBV’s net revenues increased 3.3% year-over-year to $14.81 billion in the fiscal 2022 third quarter ended September 30, 2022. The company’s operating income amounted to $4.60 billion, up 6.9% year-over-year. Its earnings before income tax expense grew 19.3% from the year-ago value to $4.40 billion.

The company’s net earnings came in at $3.95 billion, registering an increase of 24.3% from the prior-year period. Also, its adjusted EPS rose 29.3% year-over-year to $3.66.

Favorable Analyst Estimates

Analysts expect ABBV’s revenue for the fiscal 2022 fourth quarter (ending December 2022) to come in at $15.33 billion, indicating an increase of 3% year-over-year. The consensus EPS estimate of $3.66 for the ongoing quarter indicates a 10.5% year-over-year increase. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.

In addition, the company’s revenue and EPS for the current fiscal year 2022 are expected to increase by 3.9% and 9% to $58.29 billion and $13.84, respectively.

High Profitability

ABBV’s trailing-12-month gross profit margin of 71.03% is 30.4% higher than the 54.49% industry average. Its trailing-12-month EBITDA margin of 52.25% compares to the 3.29% industry average. Likewise, the stock’s trailing-12-month net income margin of 23.19% compares with the industry average of negative 3.32%.

Furthermore, ABBV’s trailing-12-month ROCE, ROTC, and ROTA of 94.55%, 15.15%, and 89.36% compare to the industry averages of negative 38.90%, 21.70%, and 29.73%, respectively.

Discounted Valuation

In terms of forward non-GAAP P/E, ABBV’s 10.44x is 43.5% lower than the 18.48x industry average. The stock’s 10.18x forward EV/EBITDA is 21.9% lower than the 13.03x industry average. Also, its forward EV/EBIT multiple of 10.52 compares with the industry average of 16.53.

In addition, ABBV’s 10.70x forward Price/Cash Flow is 35.3% lower than the 16.54x industry average.

Power Ratings Show Promise

ABBV has an overall A rating, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

ABBV has a grade of A for Quality, in sync with its higher-than-industry profitability multiples. Also, the stock has a grade of B for Growth, consistent with its revenue and earnings growth estimates.

ABBV is ranked #11 out of 163 stocks in the Medical-Pharmaceuticals industry.

Beyond what I have stated above, we have also given ABBV grades for Sentiment, Momentum, Value, and Stability. Get access to all ABBV ratings here.

Bottom Line

ABBV delivered strong top and bottom-line performance in the third quarter of fiscal 2022. The company’s business momentum is expected to continue, driven by drug and therapy approvals, strategic acquisitions, and partnerships. Moreover, given its strong performance, the company has consistently raised its dividend for nine consecutive years.

Given the company’s robust financials, higher-than-industry profitability, discounted valuation, attractive dividends, and solid growth prospects, we think it could be wise to invest in this stock.

How Does AbbVie Inc. (ABBV) Stack Up Against its Peers?

ABBV has an overall POWR Rating of A. One could also check out these other stocks within the Medical-Pharmaceuticals industry with an A (Strong Buy) rating: Novo Nordisk A/S ADR (NVO) and Bristol-Myers Squibb Co. (BMY).

ABBV shares were trading at $144.05 per share on Friday afternoon, down $0.37 (-0.26%). Year-to-date, ABBV has gained 10.53%, versus a -20.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.


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