Portfolio Update
The FiveTwenty portfolio received $18.70 in the past week. WBA paid it’s quarterly dividend during the week.
| Past Week Dividend | $18.70 |
| Current Quarter Dividend | $84.57 |
| Estimated Annual Dividend | $741.17 |
| LifeTime Dividend | $84.57 |
The capital allocation for the week of 03/14/2021 to 03/20/2021 will be used to add to our position in AbbVie Inc (NYSE: ABBV)
ABBV – Update
Since out last check-in on ABBV in week 4 of 2021, the company reported Q4 and full year 2020 earnings on 02/03/2021. Additionally the share price has been more or less flat closing at $108.22 on 03/12/2021 compared to a close of $110.86 on 01/22/2021, 2.3% decline.
| TTM | 10-year median | |
| Dividend Streak | 49* years | |
| Yield | 4.47% (MRD 4.81%) | 3.41% |
| Payout Ratio | 46.05%** (reported 191%) | 79% |
| P/E | 10.29** (reported 37.84) | 20.26 |
* includes the dividend streak ABT before ABBV was spun off, as in independent company the streak if 9 years
** computed using TTM adjusted EPS of $10.56 as of Q4 2020
With no share price appreciation and a 32% increase on adjusted EPS between Q4 2019 and Q4 2020, ABBV’s entry criteria scorecard looks better now than it did in week 4 of 2021. TTM payout ratio and P/E are lower, and yield has gone up. Now that we established that all entry criteria are flashing green, let us check out the Q4 2020 earnings report.
Q4 and FY 2020 earnings report
Did ABBV’s latest earnings report have any warning signs?
Compared to the previous year, ABBV posted impressive growth in revenue (+37.69%), adjusted net earnings (+33.45%), and adjusted EPS (+18.12%) for both Q4 and full FY 2020. A major source of the growth was the Allergan acquisition that closed on 05/08/2020. The smaller growth rate for adjusted EPS is due to the fact that ABBV paid for a portion of the Allergan acquisition with shares and thereby increase the total number of shares outstanding.
| revenue (in millions) | adj. net income (in millions) | adj. EPS . | |
| 2019 | $33 266 | $13 324 | $8.94 |
| 2020 | $45 804 | $17 781 | $10.56 |
| +37.69% | +33.45% | +18.12% |
Furthermore, the adjusted EPS for both Q4 and full FY 2020 came in ahead of estimates. The adjusted EPS of $10.56 per share beat the consensus analyst estimates of $10.48 per shares. Additionally, the numbers beat the company’s guidance from the Q3 2020 earnings report of adjusted EPS between $10.47-$10.49.
On the product front the earnings report contained a number of positive developments.
The European Commission approved Rinvoq for treatment of psoriatic arthritis and active spondylitis. Rinvoq showed superiority over competitor drug Dupixent in treating atopic dermatitis, and positive results for treating ulcerative colitis.
Additionally, ABBV announced positive top-line results for Phase 3 studies involving Skyrizi. Also in Q4 the company recorded a $4.7 billion increase in the Skyrizi contingent consideration liability. The increase was prompted by “higher estimated future sales driven by stronger market share uptake and favorable clinical trial results as well as lower interest rates.”
Thesis
Why are we adding to the FiveTwenty portfolio’s position in ABBV?
We believe that the current yield and valuation continue to present and attractive opportunity to acquire shares in the company. Additionally, the Q4 earnings report showed that ABBV is making good progress on its plans to absorb the financial impact of Humira losing patent protection in the US in 2023.
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