Recent Purchase – AbbVie

On most occasions, us Diplomats are on the same page with stock purchases. Since we are always sharing our thoughts, ideas, and analyses, chances are that if one Diplomat purchases a stock, there is a good chance the other one did as well. This happened when the two of us initiated a position in ABBV in the fourth quarter and it happened once again in January when ABBV’s price fell through the floor. Lanny wrote out his purchase of ABBV and WRK this week, and now it is my turn. Here is why I added to ABBV!

Back in the fourth quarter, I had initiated a position in ABBV. It was only 13 shares with an average price of ~$85/share and it far from a full position. That’s why when the company’s stock price fell below $80/share subsequent to their earnings release, my eyes opened wide and I initiated a transfer to my brokerage account.

Reading the earnings release, the fourth quarter had some mixed results. The company reported a 28% growth in earnings after adjusting for the one-time impairment charge, double-digit percent revenue growth compared to last year, a $5b increase to their share buyback program, and a 2019 earnings guidance that assumes 10% growth at the midpoint of the range (adjusted EPS of $8.65/share to $8.75).

Of course, there were some negatives that outweighed the positives, hence the decrease in stock price. When you think ABBV, you think Humira, and that was one of the headlining items this earnings season. This is the line from the release that many focused on: “In the U.S., Humira sales grew 9.1 percent in the quarter. Internationally, Humira sales declined 14.8 percent operationally due to direct biosimilar competition in certain international markets.” To add to this, in the earnings call, it was stated that global Humira sales are expected to decrease by 30% on an operational basis internationally. This is due to the direct competition to Humira that now exists in Europe. Reading articles about this, sales were expected to decline. However, those covering the company were not expected the percent decrease to be as large as it was.

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Disclaimer: I do not recommend any decision to the reader or any user, please consult your own research. Thank you.

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