AbbVie Inc. (ABBV - Analyst Report) reported third quarter 2015 earnings of $1.13 per share, up 27% from the year-ago quarter and surpassing the Zacks Consensus Estimate of $1.07.

Abbvie Inc. (ABBV - Analyst Report) - Earnings Surprise | FindTheCompany

Revenues increased 18.4% to $5.944 billion in the third quarter of 2015, surpassing the Zacks Consensus Estimate of $5.894 billion.

The Quarter in Details

Key drug Humira recorded growth of 12.1% with revenues coming in at $3.6 billion. U.S. sales increased 30.4% ($2.3 billion) driven by growth across all three major market categories: rheumatology, dermatology and gastroenterology. Ex-U.S. sales declined 8.9% to $1.4 billion, impacted by negative currency movement (16%). Growing awareness, favorable clinical data, additional indications and expansion into new markets should help the product to continue contributing significantly to the top-line.

Other products that performed well include Lupron (up 2.4% to $201 million), and Creon (up 8.3% to $161 million). HCV product Viekira recorded sales of $469 million, up from $385 million in the second quarter of 2015.

AbbVie recorded Imbruvica U.S. sales of $267 million and $37 million of international profit sharing.

Meanwhile, products like AndroGel, Synagis, Synthroid and Kaletra (HIV) recorded a decline in revenues. While AndroGel 1% is facing generic competition, Kaletra was most likely impacted by negative market trends.

Ups 2015 View

AbbVie raised its earnings guidance to $4.26 - $4.28 per share (guidance provided with second quarter results: $4.10 - $4.30 per share). The Zacks Consensus Estimate of $4.25 is below the guidance range.

2016 Guidance In-Line With Expectations

The company also provided its earnings outlook for 2016 – AbbVie expects earnings of $4.90 - $5.10 per share in 2016. The Zacks Consensus Estimate of $4.97 is within this guidance range.

AbbVie also announced a 12% increase in 2016 dividend.

Forecasts Double-Digit EPS Growth Through 2020

AbbVie also said that it expects to deliver double-digit earnings growth on average through 2020 with revenues expected to reach $37 billion in 2020. While the company expects worldwide Humira sales of more than $18 billion in 2020, Imbruvica revenues are expected to be about $5 billion. Sales are also expected to be driven by more than 20 new products/label expansions. According to the company, its pipeline has the potential to deliver peak sales of about $30 billion.

Operating margin is expected to improve to more than 50% in 2020 (was 36.2% in 2014) including an average improvement of 100-200 bps every year. Expansion will be driven by ongoing cost savings initiatives, product mix and lower royalty expense associated with Humira in 2017 and 2018.

Our Take

AbbVie's third quarter results were strong with the company beating on the top- as well as bottom-line and raising its outlook for 2015. The company also provided its outlook for 2016 and long-term strategy. AbbVie is looking to reduce its dependence on Humira and the launch of Viekira is a step in this direction.

Moreover, the Pharmacyclics acquisition added Imbruvica to AbbVie’s portfolio and diversified the company’s revenue base. Imbruvica has multi-billion dollar potential and the company is exploring the potential to expand Imbruvica’s label into solid tumors and autoimmune diseases.

AbbVie is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include Bayer AG (BAYRY - Analyst Report), Pfizer, Inc. (PFE - Analyst Report) and Eli Lilly and Company (LLY - Analyst Report). While Bayer is a Zacks Rank #1 (Strong Buy) stock, Pfizer and Lilly are Zacks Rank #2 (Buy) stocks.