Shares of AbbVie (NYSE: ABBV) fell hard in the wake of its Q1 earnings report, but the dip is over. The market response to slowing Humira sales is overshadowed by strength in the non-Humira portfolio, resilient business, and a solid pipeline. Analysts trimmed their targets following the release, but that statement has a caveat. 

The two analysts' revisions tracked by Marketbeat include lowered price targets, but they are still at the high end of the expected range and project upside for investors. The consensus estimate forecasts a slim 6% increase for the stock, but the high-end adds another 7% to that target and opens the door for much larger gains because it would be a new all-time high for this healthcare stock. 

AbbVie is Positioned for Long-Term Growth 

AbbVie had a solid quarter, highlighted by a return to growth, revenue strength, outperformance on the bottom line, and increased guidance. Together, the news should have moved the market to higher price points, but is offset by the slowdown in Humira. Humira sales fell 40% in the quarter and are expected to continue to slow due to competition from biosimilars. However, that is, in turn, offset by increased sales of key drugs Ubrelvy, Skyrizi, Venclexta, Rinvoq, and Qulipta, which are up 34%, 48%, 48%, 60%, and 98%, respectively. Humira revenues are now less than 20% of the total and will soon be overshadowed by Skyrizi.

Margin is another area of strength supporting the market for this stock. AbbVie’s margin contracted compared to last year but less than expected, including the unfavorable impact of milestone payments. The takeaway is that GAAP earnings of $0.77 are up 500% YOY due to one-offs in the prior year’s results, and the $2.31 in adjusted earnings beat by a nickel and strengths are projected to continue through year-end. 

The guidance is the most favorable aspect of the report and includes an increase in the expected earnings. The company raised its full-year adjusted EPS guidance to a range with the low end above consensus. Because the company is building momentum in the non-Humira portfolio and Humira sales are still solid, guidance may increase later in the year. The pipeline plays into that outlook with several positive developments over the quarter, including the acquisition of ImmunoGen. ImmunoGen’s Elahere for ovarian cancer has been approved for initial treatments and is on track for approval for numerous others. 

AbbVie Capital Returns are as Healthy as Ever 

AbbVie’s capital returns are as healthy as ever. The balance sheet highlights an increase in debt and a reduction in shareholder equity, offset by an increase in cash, up 50%, and the recent acquisition of ImmunoGen, worth more than $10 billion. It is expected to impact results as soon as this year positively and should pay for itself quickly. Elahere sales are expected to grow at a 100%+ CAGR through 2029 to nearly $700 million annually, and the estimates are light given the outlook for approvals for broader usage.

Until then, AbbVie’s dividend payment is about 67% of the Q1 earnings and 57% of the full-year guidance, which is sustainable. The company is expected to return to earnings growth by the end of the year and sustain it in 2025, so dividend increases should also continue. The company also repurchases shares to offset the dilutive effect of share-based compensation and lowered the count by .015% YOY in Q1.  

AbbVie Shows Support at a Critical Level

Shares of AbbVie fell to critical support ahead of the Q1 release, retested that level after it and continue to trade above it now. The market action could be more robust but shows support at this level with average daily volume and may begin to rebound soon. If not, the price action of AbbVie could fall to retest the recent lows and possibly set a new low. The market could fall to $155 or lower before finding solid support in that scenario, but that is not expected.