Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Here's What You Need to Know About AbbVie and GlaxoSmithKline's Upcoming Earnings

The health care sector has had a bumpy year so far to say the least. Mr. market appears unsure what to make of record high valuations across the sector, the newly implemented Affordable Care Act, and the host of geopolitical events unfolding right now.

AbbVie (NYSE: ABBV  ) and GlaxoSmithKline (NYSE: GSK  ) are two leading health care names that typify the sector's volatile year, demonstrated by the chart below. What's particularly interesting to note is that despite both companies expected to post double-digit growth in terms of earnings per share next year, their stocks haven't responded to these optimistic projections thus far. As we inch closer to their earnings releases for the second quarter, let's consider the key issues investors will be focusing on moving forward. 

ABBV Chart

ABBV data by YCharts

Key issues for AbbVie in the second quarter
The Street is expecting AbbVie to post quarter-over-quarter EPS growth of about 7%. Specifically, analysts were looking for an Adjusted EPS of $0.76 on $4.7 billion in revenue.

AbbVie's second quarter EPS estimates represent a 7.3% decrease from the same period a year ago. A closer look reveals that most of this drop is due to increasing operating costs stemming from the planned launch of the company's hepatitis C therapy in the first quarter of 2015, as well as markedly higher R&D costs. Indeed, revenue for the second quarter is expected to be essentially flat compared to a year ago ($4.692 vs. $4.70 billion). 

Turning to specific products, investors should keep a close watch on the sales growth of Humira, Synthroid, Creon and Duodopa, which all posted double digit gains in the first quarter. Humira's global sales have been particularly strong in recent quarters, creating most of AbbVie's top-line growth of late -- making it a key product to keep tabs on moving forward.

GlaxoSmithKline's second quarter could be full of surprises
Glaxo investors haven't had much to cheer about lately and the forthcoming earnings release may not reverse this trend. Although the company is hoping to grow core earnings per share by 4% to 8% this year, I think it's increasingly unlikely that even the low end of this stated target will be met for a number of reasons.

Firstly, I expect the market will be paying close attention to any further details of the ongoing bribery investigations in China that might be made available in the release, and how management expects this scandal to impact its growth strategy in this key emerging market. In the first quarter, we saw Glaxo's pharmaceutical and vaccine products struggle in the U.S., placing a heavier emphasis on emerging markets in terms of top-line growth. Tighter regulations following this bribery probe might therefore hinder global sales growth this quarter. 

Another key issue will be the surprisingly poor performance of its recently acquired vaccine portfolio from Novartis. Last week, Novartis reported that sales for this group dropped 14% to $240 million in the second quarter. While Novartis did couch these slumping sales in terms of "distribution issues" and not falling demand, investors will probably be looking for some sort of reassurance from Glaxo's management that they didn't just buy a box of rocks from Novartis. 

Investors should also pay special attention to the sales of key pharma products like Lovaza and Glaxo's host of respiratory medicines like Anoro and Breo Ellipta. Lovaza's sales are likely to take another leg down this quarter following the introduction of generic competition. Glaxo's respiratory medicines haven't yet hit their commercial stride due to insurance issues -- so it'll be important to know whether the company has gotten these problems ironed out.

Foolish wrap-up
The second quarter could determine how these two health care stalwarts perform for the remainder of the year, giving investors ample reasons to tune in this week. AbbVie's release is sure to provide more clarity on its ongoing merger with Shire and perhaps key insights into the regulatory review of its hepatitis C therapy. Glaxo's second quarter looks bleak from the outside, but strong sales for key respiratory products could provide some much needed top-line growth this quarter. 

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not just how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool's new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3037875, ~/Articles/ArticleHandler.aspx, 9/5/2015 10:42:40 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

George Budwell

George Budwell has been writing about healthcare and biotechnology companies at the Motley Fool since 2013. His primary interests are novel small molecule drugs, next generation vaccines, and cell therapies.

Today's Market

updated 13 hours ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 4:00 PM
ABBV $59.77 Down -1.81 -2.94%
AbbVie Inc. CAPS Rating: ****
GSK $39.69 Down -0.93 -2.29%
GlaxoSmithKline CAPS Rating: ****