AbbVie at $264: Humira Is Replaced, but the EPS Is Not Clean
AbbVie earned $3.54 a share over the last twelve months and paid $6.74 in dividends. Read literally, that is a payout of 190%, and a company that pays out almost twice its profit should not have a stock 1.3% below its all-year high. The shares trade around $263.96 as I write this, so something in that arithmetic has to give, and working out what is the most useful thing an AbbVie buyer can do.
My thesis is simple to state. The Humira replacement is a done deal, and the second quarter proves it. The open question is what the earnings are actually worth, because the reported numbers carry charges that make the stock look either absurdly expensive at 74.6 times trailing earnings or reasonably priced at 25.7 times forward earnings. I lean toward the second reading, with caveats I will lay out below.
The quarter that closed the Humira debate
The company’s second-quarter 2026 release reports Skyrizi sales of $5.505 billion, up 24.4%, and Rinvoq sales of $2.525 billion, up 24.5%. Humira fell 35.9% to $756 million. Add the two growth drugs and you get about $8.03 billion, which is more than ten times what Humira now earns in a quarter. Immunology as a whole reached $8.786 billion, up 15.1%.
Total revenue was $17.0 billion, up 10% from a year earlier. So immunology is about 52% of the company. The rest of the business, everything outside immunology, works out to roughly $8.2 billion, growing perhaps 5% by my arithmetic. That is a useful number because it shows the replacement is not just immunology cannibalizing itself. The non-immunology portfolio is holding its own while Humira erodes.
The old story of how AbbVie survived its patent loss matters less to a buyer today. The transition risk that hung over this stock for years has been paid for in the reported figures. A revenue base of $61.2 billion in 2025, up from $56.3 billion in 2024 and $54.3 billion in 2023, shows the dip and the recovery: sales fell in 2023, then grew 4% in 2024 and 9% in 2025.
Why the trailing P/E of 74.6 misleads
Operating income was $20.1 billion in the latest fiscal year, a 33% operating margin. Net income was only $4.2 billion, a 7% net margin. Somewhere between those two lines, roughly $16 billion disappeared. I read the gap as three things: amortization of the intangible assets from past acquisitions, charges for research purchased through deals, and interest on the debt that funded them. I cannot split the $16 billion between them from the data I have, and anyone quoting a precise breakdown without opening the 10-Q should be treated cautiously.
What matters is that these charges are large, recurring in some years and lumpy in others, and mostly non-cash in the period they are booked. The company’s own adjusted EPS strips them out, and the forward estimate of $10.25 is on that adjusted basis. That is why trailing EPS of $3.54 and forward EPS of $10.25 differ by a factor near three, and why the database shows implied growth of 190%. Nobody expects earnings to nearly triple in a year. The two numbers simply measure different things.
A trailing multiple of 74.6, against a five-year average of 58.7, therefore tells me almost nothing. The forward multiple of 25.7 tells me more, though it depends on the adjusted figure being a fair picture of cash earnings. That is a judgment, not a fact. I am making it with my eyes open.
What the numbers say together
| Metric | Value | Context |
|---|---|---|
| Price | $263.96 | 52-week range $189 to $267 |
| P/E, trailing | 74.6 | five-year average 58.7 |
| P/E, forward | 25.7 | forward EPS $10.25 |
| Price to sales | 7.1 | five-year average 5.4 |
| Dividend | $6.74 a share | yield 2.55% |
| Analyst target | $284 | range $244 to $315, 22 analysts |
Price to sales tells the same story from another angle. At 7.1 times sales, AbbVie is above its five-year average of 5.4, so the stock is not cheap on revenue even if it looks reasonable on adjusted earnings. Book value is negative (a price-to-book of -76.5), which comes from years of buybacks and dividends exceeding accumulated equity; it is a distortion, not an alarm. I ignore it for this stock.
Can the dividend be trusted?
The dividend of $6.74 a share yields 2.55%. Against GAAP earnings it is uncovered. Against forward adjusted EPS of $10.25 it is a payout of about 66%, which is high but manageable for a company with $17 billion in quarterly revenue and a 33% operating margin. The real coverage test is free cash flow, and I did not verify that figure for this post, so I will not put a number on it.
My view is that the dividend is safe as long as immunology keeps growing. It is not a dividend that can grow quickly, since the payout ratio already absorbs two-thirds of adjusted profit. A holder should expect the increases to track earnings growth, which I would guess at high single digits, not to outrun it.
The dividend is safe, then, but it will grow slowly, and that suits me fine.
One practical point for anyone comparing this yield with a bond or a bank deposit: the 2.55% is a starting figure that should rise with earnings over time, while the bond coupon stays flat. That trade-off is worth having only if the immunology growth continues, which loops back to the same two drugs. A holder who buys the stock for income is really buying a claim on Skyrizi and Rinvoq staying strong for another five to ten years, and should size the position with that in mind.
What analysts expect
Of 22 analysts, 86% rate the stock a buy. The average target of $284 sits 8% above the price, the high of $315 implies 19% upside, and the low of $244 is 8% below the market. That is a narrow range with only a small downside case, which I read as a stock that has largely priced in its recovery.
The shares sit 1.3% below their 52-week high of $267 and 39% above the low of $189. Short interest is 1.1% of shares, which is close to nothing. Earnings days have averaged a 3.5% move, and the July 31 report produced -2.5%. A stock that fell after a quarter this strong tells me expectations were already high.
Run rate versus the fiscal year
There is one more way to see the recovery. The second quarter’s $17.0 billion is 13% above the previous quarter, and four quarters at that pace would be $68.0 billion, against $61.2 billion for calendar 2025. That is an 11% gap between the current run rate and the last full year. Sequential jumps of 13% are unusual for a company of this size, and I would not extrapolate one quarter, since seasonality and timing of some sales can inflate a single print. Still, the direction is clear, and analysts’ forward EPS of $10.25 assumes the growth is not a fluke.
For a buyer, the practical consequence is that the stock’s premium to its own sales history, 7.1 against 5.4, is paid for growth that has started to show, not growth that is only promised. That is a better position than most large pharmaceutical companies can claim, and it is why I do not dismiss the stock as expensive even though I think the entry price matters.
Where I could be wrong
The bull case depends on Skyrizi and Rinvoq keeping their pace of growth. At 24% growth each they are adding about $1.6 billion of quarterly revenue a year, on my estimate from the reported growth rates, while Humira gives back only around $0.4 billion. That gap is what lifts the total. If Skyrizi and Rinvoq growth slows to the mid-teens, the total slows to roughly the mid-single digits, and the forward multiple of 25.7 starts to look full.
Three other things could undermine the thesis. Drug pricing policy can reduce the revenue of any large brand, and the two drugs that carry the story are now big enough to attract that attention. A new competitor in immunology could take share. And a stumble in the pipeline outside immunology would leave the company dependent on two products, which is the same concentration problem that Humira created, only one generation later.
I am also uncertain about the quality of the adjusted-earnings number. If the excluded charges keep recurring at the current size, they are a real cost, and the honest multiple sits somewhere between 25.7 and 74.6. I would put it nearer the forward figure, though not on it. For a reference point on how I think about a giant customer or product concentration, see my post on Qualcomm without Apple, where the same question, what replaces the big line, comes from a different direction. On paying a premium for the standard supplier in a science-heavy industry, Thermo Fisher is the comparison I would use.
The quarter that would settle it
I would buy AbbVie for a five-year hold, not a trade. I would want a better entry than $263.96, which is 1.3% from the high. A price near $244, the low analyst target, would bring the forward multiple near 24 times and give some margin for error. The data that would settle the question is the next report: if Skyrizi and Rinvoq each grow above 20% again and Humira falls under $700 million, the replacement story remains intact. I would stop worrying about the trailing multiple. If either drug slips below 15% growth, I would treat that as a sell signal for the premium.
Analysis and opinion only, not investment advice. Figures come from AbbVie’s second-quarter 2026 release, its filings on SEC EDGAR and the results exhibit it filed; valuation multiples are approximate and were checked on September 22, 2026.