Options Trade – AbbVie Inc (NYSE:ABBV) Calls
Friday, January 31, 2014

**OPTIONS TRADE: Buy the ABBV May 2014 50.000 call (ABBV140517C00050000) at or under $2.00, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $3.50.

by Ian Harvey

January 31, 2014

Introduction

AbbVie Inc (NYSE: ABBV) is scheduled to report fourth quarter 2013 results before the opening bell on Jan 31.

AbbVie has delivered positive earnings surprises in the last three quarters with an average beat of 3.99%.

Last quarter, AbbVie had posted an earnings surprise of +5.13%. It is expected that the company will beat expectations in the fourth quarter as well.

Company Details

AbbVie Inc. (AbbVie) is a research-based pharmaceuticals company. The Company discovers, develops, and commercializes advanced therapies.

AbbVie's portfolio of products include a line of adult and pediatric pharmaceuticals, which includes HUMIRA, metabolics/hormones products, virology products, endocrinology products, dyslipidemia products and other products. AbbVie products are used to treat rheumatoid arthritis, psoriasis, Crohn's disease, human immunodeficiency virus (HIV), cystic fibrosis complications, low testosterone, thyroid disease, Parkinson's disease and complications associated with chronic kidney disease, among other indications.

In October 2012, AbbVie initiated a comprehensive Phase III program for hepatitis C virus (HCV) genotype one.

Earnings

AbbVie last issued its quarterly earnings data on Friday, October 25th. The company reported $0.82 earnings per share for the quarter, beating the analysts’ consensus estimate of $0.78 by $0.04. The company had revenue of $4.66 billion for the quarter, compared to the consensus estimate of $4.52 billion. AbbVie’s revenue was up 3.3% compared to the same quarter last year.

The company also recently declared a quarterly dividend, which is scheduled for Friday, February 14th. Investors of record on Wednesday, January 15th will be given a dividend of 0.40 per share. This represents a $1.60 dividend on an annualized basis and a yield of 3.03%. The ex-dividend date of this dividend is Monday, January 13th.

Analysts Opinions

AbbVie (NASDAQ:ABBV)‘s stock had its “buy” rating reaffirmed by research analysts at Bank of America Corp. in a report released on Tuesday, 31st December, 2013. They currently have a $56.00 price objective on the stock, up from their previous price objective of $53.00. Bank of America Corp.’s price target would indicate a potential upside of 6.04% from the stock’s previous close.

The analysts wrote, “Importantly, we continue to assume solid annual sales growth for Humira (albeit at a slowing rate) until 2017 when we begin to build in modest shrinkage due to increased competition, biosimilar or otherwise,” the report said. “We remain Buy rated and continue to like ABBV shares based on the valuation, a solid/growing dividend, and low pipeline expectations.” Some highlights from the report included: -”The positive trial results reinforce our confidence that the remaining Phase III data should mimic what we saw in Phase II.”-”Risks to our PO are sector-rotation to non-defensive stocks, greater than expected pressure from US healthcare reform and/or European price cuts, adverse regulatory and political actions, changes to tax laws, rates, and/or treaties that increase the tax rate, pipeline failures, and other general R&D risks.”

Also, AbbVie has been the subject of a number of other recent research reports:-

• Analysts at Morgan Stanley downgraded shares of AbbVie from an “overweight” rating to an “equal weight” rating in a research note to investors on Thursday, December 19th.

• Finally, analysts at Jefferies Group set a $67.00 price target on shares of AbbVie in a research note to investors on Friday, December 13th.

Six analysts have rated the stock with a hold rating, seven have assigned a buy rating and one has given a strong buy rating to the company. AbbVie presently has a consensus rating of “Buy” and a consensus price target of $52.44.

Conclusion

Although revenues will be impacted by the loss of exclusivity for Tricor, Trilipix and Niaspan, the strong performance of other products should offset the negative impact of genericization. Key growth driver, Humira, will continue to boost revenues. Other products that should continue performing well include Synthroid, Creon, Zemplar and Duodopa.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the ABBV May 2014 50.000 call (ABBV140517C00050000) at or under $2.00, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $3.50.



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