What was looking like the beginning of a strong run for AbbVie (ABBV -5.60%) hit a speed bump last week. The big drugmaker announced disappointing third-quarter results. Although AbbVie beat Wall Street earnings estimates, its revenue fell short of expectations.
Unsurprisingly, AbbVie's shares fell on the mixed Q3 results. But here's why dividend investors can still buy AbbVie stock with no worries.
Ironing out some wrinkles
There was one key reason behind AbbVie's lower-than-expected revenue in the third quarter. CEO Rick Gonzalez noted in the company's earnings press release that AbbVie felt "the impact of temporary economic headwinds on our aesthetics products."
Gonzalez provided additional details in AbbVie's Q3 conference call. He said that the downward trends in the consumer confidence index and real personal-consumption expenditures, along with high inflation, are hurting sales of the company's consumer aesthetics portfolio. In particular, injectable dermal-filler Juvederm and body-contouring products are feeling the effects of the current economic dynamics.
However, this shouldn't be concerning for long-term investors. Gonzalez pointed out that the aesthetics portfolio recovered strongly after the Great Recession. While the company expects the headwinds could carry over into next year, it predicts a return to solid growth when consumers regain confidence. Importantly, AbbVie remains optimistic that its aesthetics portfolio will achieve the long-term guidance of total sales topping $9 billion in 2029.
Hope beyond Humira
It's understandable that some investors could be anxious about the looming challenge to Humira. AbbVie's top-selling drug will face biosimilar competition in the U.S. beginning in 2023. Again, though, there's no reason to worry.
Sure, sales for Humira will decline significantly. However, they won't evaporate altogether. AbbVie has been busy negotiating formulary access so that it will be able to compete with biosimilar rivals. The big drugmaker projects that it will have formulary access for at least 80% of all U.S.-covered lives.
The better news is that sales for Humira's successors, Rinvoq and Skyrizi, are beating expectations. AbbVie believes the two drugs will together eventually eclipse Humira's peak annual sales.
2023 should be the trough year for AbbVie's earnings. The company should return to growth in 2024, despite some continued erosion of Humira's sales. After then, AbbVie expects to deliver high-single-digit growth through the end of the decade.
Remember, too, that the Humira loss of exclusivity isn't taking anyone by surprise. The negative impact of lower sales for the drug is already largely baked into AbbVie's share price.
Positives on the horizon
While some focus on the negatives, there are actually several positives on the horizon for AbbVie. The company expects to soon win regulatory approval for Vraylar as an adjunctive treatment for major depressive disorder. It anticipates a key regulatory win in the first half of 2023 for ABBV-951 in treating Parkinson's disease.
Income investors definitely have good news on the way. Last week, the drugmaker announced a 5% increase to its quarterly dividend that will be payable in February 2023. AbbVie has grown its dividend by 270% since its separation from Abbott nearly 10 years ago. Its dividend yield currently tops 4%.
This will extend AbbVie's streak of dividend increases to 51 consecutive years. The company reigns as a Dividend King and will almost certainly continue to hold that distinction for a long time to come.
