Is Trending Stock AbbVie Inc. (ABBV) a buy it now?

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.

Shares of this drugmaker have returned +1.9% over the past month compared to the +5.9% change in the Zacks S&P 500 composite. The industry Zacks Large Cap Pharmaceuticals, to which AbbVie belongs, has gained 11% over this period. Now the key question is: where could the stock be heading in the near term?

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

At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.

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.

For the current quarter, AbbVie is expected to post earnings of $3.14 per share, a change of +6.4% from the prior year quarter. The Zacks consensus estimate has changed by +0.9% over the past 30 days.

The current year earnings consensus estimate of $14.16 indicates a year-over-year change of +11.5%. This estimate has changed by +0.2% over the last 30 days.

For the next fiscal year, the consensus earnings estimate of $12.46 indicates a -12% change from what AbbVie is expected to report a year ago. Over the past month, the estimate has changed by +0.7%.

With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the short term, as it effectively harnesses the power of earnings estimate revisions. . Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, AbbVie is ranked Zacks Rank #3 (Hold).

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.

In the case of AbbVie, the consensus sales estimate of $13.55 billion for the current quarter indicates a year-over-year change of +4.2%. Estimates of $60.36 billion and $56.93 billion for the current and next fiscal year indicate changes of +7.4% and -5.7%, respectively.

Latest reported results and history of surprises

AbbVie reported revenue of $14.89 billion in the last quarter, representing a year-over-year change of +7.4%. EPS of $3.31 for the same period versus $2.92 a year ago.

Compared to the Zacks consensus estimate of $15.03 billion, reported revenue is a surprise -0.94%. The EPS surprise was +0.61%.

Over the past four quarters, AbbVie has exceeded consensus EPS estimates three times. The company has exceeded consensus earnings estimates twice during this period.

Evaluation

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.

Compare the present value of a company’s valuation multiples, such as its price/earnings (P/E), price/sales (P/S), and price/cash flow (P/CF), to its own historical values ​​help determine whether its stock is fairly valued, overvalued or undervalued, while comparing the company against its peers on these metrics gives a good idea of ​​the reasonableness of its price.

As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on.), which helps determine whether a stock is overvalued, correctly valued, 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.

Conclusion

The facts discussed here and plenty of other information about Zacks.com might help determine whether or not 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.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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