Drug manufacturing giants Gilead Sciences (NASDAQ:GILD) and AbbVie (NYSE:ABBV) both reported quarterly results that sent their stock price lower. Why are they slumping, when cash flow is strong and the pipeline ensures growth ahead?
Gilead posted revenue falling 9.7% to $5.14 billion in Q2. It then filed a mixed shelf offering that could dilute shareholders next. The weak earnings and dim prospects hurt the stock’s performance. Still, the ~4% yield will keep shareholders holding for now.
In the next two quarters, remdesivir sales will only accelerate, lifting revenue. Gilead is the only antiviral supplier and faces no competition. The only risk is the drug showing minimal positive effects when compared to a placebo.
AbbVie peaked at $100 in late July and continued trending to the low $93 in the week after the earnings report. It earned $2.34 a share non-GAAP. Revenue rose 26.3% Y/Y to $10.43 billion. Allergan is a big acquisition that added modestly to earnings. Yet investors are cautious about the debt levels.
As ABBV stock falls, its yield improves to 5%. The strong revenue stream will only increase as Allergan’s pipeline of aesthetics and cosmetics rebounds. During the COVID-19 lockdown, Botox procedures fell. Now, it is recovering and will increase.
Accumulate both GILD and ABBV stock.
