High Yielding AbbVie Is A Steal At This Price Shares of AbbVie (NYSE: ABBV) have been trading a discount to other stocks in the group and went on an even deeper discount over the past two months. A surprise...

Healthy Results And Pipeline Spark Buying In AbbVie

Shares of AbbVie (NYSE: ABBV) have been trading a discount to other stocks in the group and went on an even deeper discount over the past two months. A surprise warnings on the class of drugs to which Rinvoq belongs sent the market scurrying for cover but has proven to be a knee-jerk reaction to the news. While the warning about JAK inhibitors still stands the status of Rinvoq is unchanged and not the only tool in AbbVie's shed. The company has a healthy portfolio of current treatments as well as a pipeline that promises to keep the company busy for the foreseeable future. A few of the updates on the company's pipeline of products include positive results in a number of late-stage trials and the expansion of potential treatments for existing drug Vuity. The takeaway for investors is that AbbVie's near 5.0% yield is a steal with the stock trading at less than 10X its earnings.

AbbVie Results Are What The Doctor Ordered

AbbVie's Q3 results were a soothing balm for the market and just what the doctor ordered. The company reported $14.34 billion in revenue or up 11.2% over last year and 30 basis points above the Marketbeat.com consensus. The margin of outperformance is small but the bar was high. AbbVie grew more than 50% in last year's Q3 period and the comps are only going to get tougher.

On a segment/product basis sales of Humira grew 6% to top $5.4 billion and account for 37.6% of the revenue. Sales of Immunology treatments grew by 15%, the only area of strength, while sales of Aesthetic and Neurological products fell 29% and 26% respectively. Declining sales are not a good sign but are versus triple-digit comps in the previous year. Botox, acquired as part of the deal with Allergan, grew 39% (cosmetics) and 23% (therapeutics).

Moving down the report, the company was able to widen the gross margin by 100 basis points but rising costs offset that gain. At the operating level, rising costs expanded SG&A by 200 basis pints but left profits slightly better than expected. At the GAAP level, the $1.78 in reported earnings missed the consensus by $0.22 but is up nearly $0.50 from last year. On an adjusted basis, the company reported $3.33 in EPS to beat consensus by $0.11 and grow 17.6% over last year.

Turning to the guidance, the company is expecting strength to continue into the 4th quarter and has raised guidance for the year again. The company is now expecting adjusted EPS in a range of $12.63 to $12.67 versus the previous high-end of $12.62 and the consensus estimate of $12.57.

AbbVie, A Long History Of Dividend Growth In The Making

AbbVie is one of the strongest dividend payers on Wall Street with a yield near 5.0% and a very optimistic outlook for dividend growth. The company has been hiking the payment for 8 years, ever since the spin-off from Abbot Laboratories, which ultimately adds another two decades of effective dividend payouts. The payout ratio is a tad high at 44.5% but backed up by a relatively safe balance sheet. The company is carrying some debt but that was instrumental in the Allergan deal and has led to robust growth. In our view, the market would not be out of line to expect double-digits for the next increase. The most recent increase was just declared and worth 9.0% to shareholders.

The Technical Outlook: AbbVie Rockets Higher

Shares of AbbView responded favorably to the Q3 news jumping nearly 5.0% intraday. The move confirms support and reversal at the $106/$108 level and has the stock set up to melt-up. Price action is moving higher in early trading now and looks like it will continue higher. Resistance is at the $120 level and could be strong. If price action can get above $120, however, it would set a new all-time high and could lead the stock up another $13 to $15 in the near to short-term.