AbbVie is one of the cheapest companies in The Dividend Aristocrats spectrum when it comes to P/E and is offering one of the highest dividend yields. This is why company seems interesting to me. My current investable level is at $55, but when share price was at that level I didn’t have too much courage. This was a mistake and I should have bought it. On the other hand it is “just 10%” higher, which means that when sell-off on the general market comes it might be a good idea to buy shares. It should be noted, that growth was mainly due to Trump’s election – risk off for drug prices and rally in November. Adjusting for this event we can say that shares are more or less flat.

Let’s look on last financial results, to be ready to quickly decide about action when opportunity comes.

“The fourth quarter was a continuation of the strong performance and business momentum AbbVie has delivered since we became an independent company in 2013. Our 2016 revenue and EPS growth rank us among the leaders in our industry,” said Richard A. Gonzalez, chairman and chief executive officer, AbbVie. “We continue to make significant progress on our objectives across each aspect of our company strategy, with strong commercial execution, financial discipline and a focus on our advancing pipeline to drive long-term sustainable growth. Our guidance for 2017 reflects continued strong performance and confidence in our business fundamentals.”

Just perfect, but how are numbers going?

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2016 was definitely a good year for AbbVie, but look on Q4 alone. Adjusted diluted EPS was higher than in 2015, but dynamics is lower than for the full year. On the other hand we can see that guidance for 2017 is still positive:

AbbVie is issuing GAAP diluted EPS guidance for the full-year 2017 of $4.55 to $4.65. AbbVie expects to deliver adjusted diluted EPS guidance for the full-year 2017 of $5.44 to $5.54, representing growth of 13.9 percent at the mid-point. The company’s 2017 adjusted diluted EPS guidance excludes $0.89 per share of intangible asset amortization expense and other specified items.

Well, I do not understand why company which is expected to grow by double digit % points is traded with P/E below 13 when GAAP diluted EPS is taken and even lower with adjusted EPS. Where from does the difference between reported and adjusted comes?

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I am not an expert in accounting issues and which result better shows the financial results of AbbVie. When reported earnings are taken (lower) and valuation is OK then for me is cool. Always remember It is better to be roughly right than precisely wrong. I prefer to be right buying than being right in calculation of multiples.

 

As it comes to my recommendations nothing changes: AbbVie looks like a clear, but risky, buy for me. Even though shares are traded 10% higher than my investable level I think it might be still a good opportunity to buy now. As you know I am waiting for special opportunities so I will not buy AbbVie now, but when share price goes up from $60 to for example $65 it wouldn’t be strange for me.

 

Disclaimer ABBV – no position