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

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.

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.

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.