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Why AbbVie Could See a Big Rise in Its Net Profit Margin in Fiscal 2017

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Jan. 7 2018, Updated 10:14 a.m. ET

EPS guidance

In its 3Q17 earnings conference call, AbbVie (ABBV) raised its fiscal 2017 adjusted diluted EPS (earnings per share) guidance range from $5.44–$5.54 to $5.53–$5.55, which represents a rise of 14.9% based on the midpoint of the range.

The above, however, doesn’t include the $1.26 per share impact arising from multiple one-time events and non-cash amortization. The company has also updated its 2017 GAAP (generally accepted accounting principles) diluted EPS range from $4.55–$4.65 to $4.27–$4.29 to reflect the impact of milestone payments as well as its rapidly advancing Risankizumab research program.

AbbVie has projected its fiscal 2017 gross margin and operating margin to be ~80.5% and ~42.5%, respectively. The company has also projected its fiscal 2017 net interest expenses to be close to $1.0 billion. AbbVie expects its fiscal 2017 effective tax rate to be ~19%.

Notably, AbbVie accounts for 0.67% of the SPDR S&P 500 ETF’s (SPY) total portfolio holdings.

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Significant rise in net profit margins

Wall Street analysts have projected that for fiscal 2017, AbbVie will report a net profit margin of ~26.0%, which would mean a YoY growth of ~269 basis points.

By comparison, peers Amgen (AMGN), Celgene (CELG), and Gilead Sciences (GILD) are expected to report net profit margins of ~36.5%, ~32.5%, and ~40.7%, respectively, for fiscal 2017.

4Q17 guidance

AbbVie has projected a 10% YoY top-line rise on an operational basis, with a favorable impact of 2% due to foreign currency fluctuations in 4Q17.

AbbVie has also projected its adjusted EPS (earnings per share) to be in the range of $1.42–$1.44 for 4Q17, which would be a 19.2% rise on a YoY (year-over-year) basis, considering the midpoint of its guidance range. This also involved $0.41 from the impact of non-cash amortization and other one-time events.

In the next part of this series, we’ll discuss Humira’s growth prospects in greater detail.

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