Pharmaceutical giant AbbVie (NYSE:ABBV) reported earnings recently, beating estimates on revenue and earnings per share. The current state of the company is very impressive and future growth looks promising. The stock might have rallied by 40% in the last year, but let me show you why you should still consider buying into AbbVie at these prices. 

Exceeding expectations

AbbVie, along with other major pharmaceutical companies such as Bristol Myers Squibb, Merck, and Pfizer, reported quarterly results recently; it stood out among its peers, beating analyst expectations. In its Q1 2021 earnings, reported April 30, AbbVie brought in $13.01 billion, growing its first-quarter revenues 51% year over year. It also beat earnings-per-share (EPS) estimates according to generally accepted accounting principles (GAAP) by $0.52, reporting quarterly GAAP EPS of $1.99.

There was tremendous growth across many of AbbVie's business lines, mainly in its immunology and aesthetics segments. Revenue from the former came in at $5.7 billion, an increase of nearly 13% year over year. Sales from immunosuppressant Humira increased 3.5% to $4.86 billion, but the growth really came from its newer immunology products, Skyrizi and Rinvoq, which grew sales year over year by 91.1% and 600%, respectively.

Another stunning growth figure came from the company's aesthetics portfolio, which was a part of AbbVie's Allergan acquisition in 2019. Global revenue from that portfolio came in at $1.14 billion, an increase of nearly 35% year over year. The shining star in the aesthetics business is Botox, which increased sales by 45% year over year to $477 million in the first quarter of 2021.

Finally, AbbVie was able to raise its financial guidance on its GAAP EPS from $6.69 to $7.27, and overall 2021 EPS from $12.32 to $12.37. Its best-selling drug, Humira, already went off-patent in Europe in 2018 and will be going off-patent here in the U.S in 2023.. But in this earnings report, AbbVie has proven it can grow the other parts of its business and diversify away from Humira. 

Doctor and Patient talking

Image source: Getty Images.


Pipeline growth

AbbVie has been busy strengthening its pipeline to offset the loss of revenue when Humira does finally go off-patent. It's been filing to test and apply new indications for some of its existing drugs, including Skyrizi, Rinvoq, Imbruvica (for lymphoma), and Venclexta (for leukemia). So far, it has filed for more than 20 different indications at the phase 3/registration stage across these four drugs. This would mean a lot more possibilities for these drugs to treat a range of diseases and increase sales for the company. The company has at least 70 additional filings across all three phases, spread out among its immunology, oncology, neuroscience, and eye-care business lines. 

In addition to extensive in-house work on the pipeline, AbbVie is also looking at growing the business through acquisitions. Just a few weeks back, it reached a deal to possibly acquire biotech company Mitokinin through an option agreement (in which a contract is made between a buyer and seller for the former to possibly buy the business later at a predetermined price).

Mitokinin has developed a technology to increase the activity of the PINK1 compound, which is heavily linked to Parkinson's disease. Increasing the activity of the PINK1 compound increases overall brain activity and synaptic function, thus lowering the risk for developing a disease like Parkinson's. The company has a neurodegenerative disease pipeline of products to treat this disease. AbbVie purchased an option to buy the company if it completes the study of its lead PINK1 compound.

Analysts estimate the Parkinson's disease market could reach $5.69 billion by 2022, and the possible addition of Mitokinin to AbbVie's portfolio could help drive future growth for the pharmaceutical giant.

AbbVie's efforts to diversify its current products as well as expand its pipeline to new areas should provide optimism to investors. Expanding the portfolio beyond Humira will drive growth in the near and long term. 

Still a great buy

AbbVie has rallied very strongly over the past 12 months, and it's up nearly 40% from the lows we saw near the end of October 2020. I believe this is mainly thanks to investors buying back the stock upon the realization that the patent-cliff fears on Humira were overblown.

Despite some bad press around Humira's patent status, AbbVie's revenue has continued to grow over the past few years, with an average of 13.1% annualized revenue growth over that time and no signs of slowing down. 

Shares are currently priced at about $117, and I believe this stock can still go a lot higher. It was trading at a forward price-to-earnings (P/E) ratio  of 10.4 just a few months back, and that metric is currently has come down to just 9.3, meaning the the price of the stock has gotten cheaper in relation to earnings. If the stock reverted back to a 10.4 forward P/E ratio, putting it back in line with its historical averages, and we take the earnings per share estimates for the next fiscal year at $13.83, we are looking at a $143 share price. Thus, buying AbbVie stock right now would give investors a nearly 25% upside.

AbbVie also boasts a very attractive dividend of 4.25%, much higher than the S&P 500's average of about 2%, and the company has been increasing that dividend at an average rate of almost 19% over the past five years. All of this together makes AbbVie one of the best deals on Wall Street, and after a quarter that exceeded a lot of expectations, it's a stock that looks like a buy.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.