AbbVie (ABBV), which has been in the news thanks to the recent approval of its hepatitis C virus (HCV) treatment Viekira Pak, will be reporting fourth quarter and full year 2014 results on Jan 30, before the market opens.
AbbVie’s performance has been pretty good in the first nine months of 2014 with the company beating expectations consistently. The average earnings surprise over the last four quarters is +6.67%.
Humira and Viekira Pak Will Be in Focus
Key drug Humira should remain the main growth driver in the fourth quarter; growing awareness, favorable clinical data, additional indications and expansion into new markets should help the product to continue contributing significantly to the top-line.
Humira should continue to witness double-digit growth in most international markets and AbbVie expects to exceed its initial guidance for the product in 2014.
Synagis, which protects at-risk infants from severe respiratory disease, is a seasonal product with a major part of sales being recorded in the first and fourth quarters of the year. Continued product uptake and strong commercial execution should keep Synagis sales strong in the fourth quarter.
Meanwhile, lipid franchise sales will continue to be impacted by generic competition.
AbbVie, which gained FDA approval for its HCV treatment in Dec 2014, will see a sequential increase in SG&A spend as the company invests in the product launch.
We expect investor focus to primarily remain on the initial response to the Viekira Pak launch as well as the company’s sales expectations for 2015. AbbVie has already provided earnings guidance for 2015 ($4.25 – $4.45 per share). However, the company will refine the guidance as the HCV launch progresses. Key players in the HCV market include Gilead’s (GILD) Sovaldi and Harvoni.
What Our Model Indicates
Our proven model shows that AbbVie is likely to beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for increasing the odds of an earnings surprise. This is the case as elaborated below.
Zacks ESP: The Earnings ESP for AbbVie is 1.18%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are 86 cents and 85 cents, respectively.
Zacks Rank: ABBV’s Zacks Rank #2 (Buy) increases the predictive power of ESP.
Stocks That Warrant a Look
Here are a few health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
Acorda Therapeutics, Inc. (ACOR) has an Earnings ESP of +200% and a Zacks Rank #3. The company is scheduled to release results on Feb 12.
The Earnings ESP for Actavis (ACT) is +4.7% and it carries a Zacks Rank #3. The company is scheduled to release results on Feb 18.
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