Here’s what to know beyond why AbbVie Inc. (ABBV) is a trending stock
AbbVie (ABBV) is one of the most watched stocks by visitors to Zacks.com lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.
Over the past month, shares of this drugmaker have returned -10.3%, compared to the -6.1% change in the Zacks S&P 500 composite. Pharmaceuticals, of which AbbVie is a part, gained 0.5%. The key question now is: what could be the future direction of the title?
Although press releases or rumors about a substantial change in a company’s trading outlook will usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
Rather than focusing on anything else, at Zacks we prioritize assessing change in a company’s earnings projection. Indeed, we believe that the fair value of its shares is determined by the present value of its future earnings streams.
We basically look at how sell-side analysts covering the stock are revising their earnings estimates to reflect the impact of the latest trading trends. And if earnings estimates increase for a company, the fair value of its shares increases. A higher fair value than the current market price stimulates investors’ interest in buying the stock, causing its price to rise. This is why empirical research shows a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
AbbVie is expected to post earnings of $3.44 per share for the current quarter, representing a year-over-year change of +10.6%. Over the past 30 days, the Zacks consensus estimate has changed by -1.6%.
The current year earnings consensus estimate of $14.04 indicates a year-over-year change of +10.6%. This estimate has changed by -0.3% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $11.84 indicates a -15.7% change from what AbbVie is expected to report a year ago. Over the past month, the estimate has changed by +104.1%.
With an impressive externally audited track record, our proprietary stock rating tool – the Zacks Ranking – is a more conclusive indicator of a stock’s short-term price performance, as it effectively harnesses the power of earnings estimate revisions. . The magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, resulted in a Zacks No. 3 (hold) ranking for AbbVie.
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Expected revenue growth
While a company’s earnings growth is arguably the best indicator of its financial health, nothing happens if it can’t grow its revenue. It is almost impossible for a company to increase its profits without increasing its revenue for long periods of time. Therefore, knowing the potential revenue growth of a business is crucial.
For AbbVie, the current quarter sales consensus estimate of $14.73 billion indicates a year-over-year change of +5.5%. For the current and future fiscal years, the estimates of $59.67 billion and $55.75 billion indicate variations of +6.2% and -6.6%, respectively.
Latest reported results and history of surprises
AbbVie recorded revenue of $13.54 billion in the last reported quarter, representing a year-over-year change of +4.1%. EPS of $3.16 for the same period versus $2.95 a year ago.
Compared to the Zacks consensus estimate of $13.55 billion, reported revenue is a surprise -0.09%. The EPS surprise was +0.32%.
Over the past four quarters, AbbVie has exceeded consensus EPS estimates three times. The company exceeded consensus revenue estimates only once during this period.
Without considering the valuation of a stock, no investment decision can be effective. Crucial to predicting a stock’s future price performance is whether its current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to traditional and unconventional valuation metrics to rank stocks from A to F (an A is better than a B; a B is better than a C; and so on), is quite useful in determining whether a stock is overvalued, correctly priced, or temporarily undervalued.
AbbVie is rated B on this front, indicating that it is trading at a discount to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information about Zacks.com might help determine whether it’s worth paying attention to the market buzz about AbbVie. However, its No. 3 Zacks ranking suggests it could perform in line with the broader market in the near term.
Zacks names ‘only one best choice for doubling up’
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
It’s a little-known chemical company that’s up 65% year-on-year, but still very cheap. With relentless demand, rising earnings estimates for 2022 and $1.5 billion for stock buybacks, retail investors could step in at any time.
This company could rival or surpass other recent Zacks stocks which are expected to double, such as Boston Beer Company which jumped +143.0% in just over 9 months and NVIDIA which jumped +175.9% in one. year.
Free: See our best stock and our 4 finalists >>
Click to get this free report
AbbVie Inc. (ABBV): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.