Abbott Laboratories (ABT 0.63%) and AbbVie (ABBV -4.58%) share a common past. About a decade ago, Abbott spun out its pharmaceuticals business into a separate company to create AbbVie. Since then, both companies have grown revenue and net income in the triple digits. At the same time, they've steadily increased dividends year after year, offering shareholders passive income growth too.
After last year's stock market gains, you may be looking toward the next bull market and aiming to prepare by scooping up growth stocks. Both Abbott and AbbVie could fit into your strategy. But, if you could only buy one, which should you choose? Let's find out which one of these healthcare companies makes the better growth stock to buy now.
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The case for Abbott
As mentioned, Abbott is where the story of these two companies started. A physician who mixed his own medicines created Abbott in the late 1880s, and it's come a long way since. Today, the healthcare giant includes four business units -- diagnostics, medical devices, nutrition, and established pharmaceuticals -- and in the last full year, the company brought in more than $40 billion in revenue.
This diversification helps Abbott to excel over time, since when one business unit faces headwinds, others may help compensate for declines. For example, earlier in the pandemic, cancelled surgeries led to pressure on the medical device business -- but Abbott's strength in COVID testing helped the company grow overall revenue. And as COVID testing revenue slipped in recent times, the device business advanced.
In the third quarter of last year, excluding COVID testing, all four businesses reported double-digit sales growth, helping Abbott deliver more than $10 billion in sales. And Abbott forecasts full-year sales growth in the low double digits, excluding COVID testing sales.
Meanwhile, Abbott, a Dividend King, has increased its payment to shareholders for more than 50 years, suggesting more of the same is ahead. A track record like this shows dividends are a priority for the company -- and that's great news for investors. Abbott pays a dividend of $2.20 per share, representing a dividend yield that, at 1.93%, tops that of the S&P 500 index.
The case for AbbVie
AbbVie may be facing its biggest challenge ever right now. Its top blockbuster (and the world's best-selling drug) Humira recently lost exclusivity. This immunology drug brought in more than $21 billion in annual revenue at its peak, reached in 2022.
But here's why there's reason to be optimistic about AbbVie. The pharma giant has been grooming its two newer immunology drugs -- Rinvoq and Skyrizi -- to take over where Humira leaves off. AbbVie expects these two drugs to together top Humira's peak revenue in 2027.
So far, these newer immunology products are on the right track, each delivering sales growth of more than 50% in the most recent quarter. And they're set to bring in more than $11 billion combined for full year 2023.
At the same time, AbbVie's current portfolio includes other top-selling drugs, such as bipolar disorder drug Vraylar and neuroscience treatment Botox. This platform delivered double-digit revenue growth in the most recent quarter, and the company predicts this momentum will continue.
On top of this, several near-term potential catalysts lie ahead for AbbVie. The company expects seven regulatory decisions this year and aims to complete six regulatory submissions.
So even though AbbVie's revenue is declining right now, this is a temporary situation. The company expects a return to growth as soon as next year -- and from there predicts a high-single-digit compound annual growth rate through the end of the decade.
And, like Abbott, AbbVie prioritizes paying dividends to shareholders. The company, since its spinoff from Abbott, has increased its quarterly dividend by more than 285%.
Abbott or AbbVie?
Abbott and AbbVie both are attractive companies that have what it takes to lift your portfolio over time. But right now, AbbVie looks like a better growth stock to buy for a few reasons.
First, it's significantly cheaper than Abbott in relation to forward earnings estimates.
ABBV PE Ratio (Forward) data by YCharts
Second, over time, it's surpassed Abbott when it comes to revenue growth. Of course, that's been thanks to Humira, but there's reason to believe Skyrizi and Rinvoq could follow in the footsteps of that older blockbuster drug.
Finally, these newer immunology drugs and close-to-market candidates could drive another wave of growth, starting next year. All of this means today may be just the right moment to scoop up this growth stock -- and reap the rewards over time.
