Ticker Reports for July 30th
AbbVie Analysts Lead the Stock Higher as Humira Worries Recede
AbbVie (NYSE: ABBV) was among the pharma companies worst positioned for a patent cliff that has come and gone. However, management's lean toward diversifying away from Humira and into a broader range of treatments has more than paid off. The takeaway is that growth is back in the immunology portfolio despite the 30% contraction in Humira sales and accelerating across the system.
The results for Q2 were much better than expected, including a positive guidance revision and a reaffirmed outlook for long-term revenue growth that resonates with the analysts. Analysts applaud AbbVie’s Q2 results, citing portfolio quality and the pipeline in the numerous revisions issued after the release. The critical detail is that the Moderate Buy rating is unwavering, and the price target is rising. The consensus price target offers only a small 2% gain for investors, but it is up 5% in the week following the report and 10% compared to last year, leading this market to a new high. The range’s high-end is $214, which could be reached by early 2025.
AbbVie Accelerates Growth on Ramping Sales of Key Treatments
AbbVie had a good quarter, producing $14.46 billion in net sales. Revenue is up 4.2% compared to last year, and growth is accelerating sequentially, outpacing the consensus by 300 basis points. All segments contributed to the gain, led by a 14.7% increase in Neurosciences. Oncology, another area of strength, advanced by 10.5%, while Immunology gained 2.3%. Aesthetics, which includes Botox Cosmetic, grew by 0.5% and all aided margin. Within Immunology, which is almost 50% of the business, sales of Rinvoq and Skyrizi are strong, up 55% and 45%, respectively, and more than offset the loss of Humira revenue.
The margin news is mixed but favorable to investors. The company widened its gross and operating margin on a GAAP and adjusted basis but fell short of the consensus. The GAAP and adjusted earnings are down compared to last year due to one-offs that include increased R&D and milestone expenses, while adjusted earnings are up. The salient detail is that adjusted earnings missed the consensus by a slim $0.01 margin, leaving cash flow and the capital return healthy.
The company's guidance is favorable. It raised its guidance for adjusted EPS to a range bracketing the consensus. As-expected guidance isn’t usually a catalyst for higher share prices, but the revisions trend suggested analysts feared the worst. Regarding the pipeline, AbbVie announced numerous advances during the quarter, including FDA approval of Epkinly and advances in several oncology programs.
AbbVie Capital Returns Provide Value for Pharma Investors
AbbVie’s dividend is attractive within the pharmaceutical universe because it is among the highest payouts, even with shares trading at record levels and reliable. The only drawback is that the payment is at the low end of its historical range, but the outlook for distribution growth offsets that. AbbVie is counted as a Dividend Aristocrat due to its history with Abbott Laboratories and is positioned to continue raising for another twenty-five years. Whether or not the yield is lower than average, steadily increasing distribution payments is a force that will support higher share prices over time.
The dividend payout is less than 60% of the earnings, with earnings growth expected to return in Q1 2025, if not by the end of F2024, so the pace of increases may accelerate. AbbVie also buys back stock. Repurchases are ramping higher in 2024 after a pause in 2023 and are on track to reduce the share count by year’s end.
Bullish Price Action for AbbVie Following Release
The price action following the release is bullish. The market rose 7.5% the week of the release and is now consolidating near the high, a fresh all-time high set with a bullish trend-following movement. Rising EMAs, bullish signals in the MACD, and stochastic indicators compound the action. They suggest upward momentum will continue to carry the market higher. Shares of ABBV could rise as much as $25 to $30 in this scenario and reach the $210 level by January 2025.
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Harley-Davidson Stock Revs Up With Billion Dollar Buyback Program
Iconic motorcycle manufacturer Harley-Davidson Inc. (NYSE: HOG) juiced up its stock with a new $1 billion stock buyback program following its Q2 earnings report. The company reported strong top and bottom line performance, but its 2024 outlook was expectedly weak. A tough macroeconomic climate and softening consumer spending have been looming concerns that continue to plague durable goods purchases. The company has been offering promotions and incentives to clear out inventories, which helped boost revenue numbers. However, this has also stunted demand for its 2024 models, which also lack promotions to incentivize dealers. This led to a lowering of its full-year 2024 outlook.
Harley-Davison operates in the auto/tires/trucks sector, competing with motorcycle, Powersports, and recreational vehicle manufacturers, including Honda Motor Co. Ltd. (NYSE: HMC), Polaris Inc. (NYSE: PII), and Thor Industries Inc. (NYSE: THO).
Harley-Davidson Investors Have a Piece of 3 Companies
Harley-Davison is the umbrella for the company's three divisions. The Harley-Davidson Motorcycle Company (HDMC) designs, manufactures, licenses, and services its motorcycles. It sells its bikes, apparel, and parts through a network of authorized dealers. Harley-Davison Financial Services (HDFS) provides financing options for wholesale and retail buyers and point-of-sale (POS) insurance and protection services. LiveWire Group Inc. (NYSE: LVWR) sells electric motorcycles and kids' balance bikes, as well as parts and apparel.
Investors in Harley-Davidson own a piece of all three companies. While LiveWire is a standalone publicly traded company, it is still considered a subsidiary of Harley-Davidson, which owns a controlling interest between 70% and 90%. Harley-Davidson includes LiveWire results in its earnings reports.
HOG Attempts an Ascending Triangle Breakout Pattern
The daily candlestick chart for HOG illustrates an ascending triangle breakout attempt pattern. This pattern is comprised of a rising lower trendline representing higher lows converging at the apex with the flat-top upper trendline at $36.97. As HOG gets closer to the apex point, the stock will either break out through the upper trendline or break down through the lower trendline. The Q2 earnings release gapped up the shares attempting to break but has so far closed back under the upper trendline. The daily relative strength index (RSI) is still rising through the 61-band. Pullback support levels are at $35.16, $33.41, $31.67, and $29.41.
Headline Results Look Strong But Reveal Weakness Under the Hood
Harley-Davidson reported Q2 EPS of $1.63, beating consensus estimates by 23 cents. Revenues rose 12% YoY to $1.62 billion, beating $1.29 billion consensus analyst estimates. North American retail performance was down 1%, but sales of its more expensive Touring and CVO motorcycles surged 12% YoY, causing the EPS beat. HDMC's revenues climbed 13%, driven by its global shipment increase of 16%. HDFS operating income rose 21%, and revenue grew 10% YoY.
The company had heavy promotions and incentives to clear out inventory, leaving buyers exhausted and demand soft for its 2024 models. Motorcycle sales rose 20%, but parts & accessories sales fell 10% along with apparel sales falling 4% YoY. As a result of the heavy promotions, the gross margin fell 270 bps to 32.1%. Its Touring market share rose 5.3% to 75% in the first half of 2024.
Harley-Davidson Lowers 2024 Guidance Metrics
The company lowered its 2024 revenue for HDMC to be down 5% to 9% YoY, from the flat to 9% previous forecast. HDFS operating income is expected to be flat to up 5% YoY. LiveWire electric motorcycle unit sales are expected to be between 1,000 and 1,500, with operating losses of $105 million to $115 million. Harley-Davidson's company-wide capital investments are expected to be between $225 million and $250 million. The operating margin was lowered from 10.6% to 11.6%, down from earlier forecasts for $12.6% to 13.6%.
CEO Remains Cautious But Optimistic
Harley-Davidson CEO Jochen Zeitz pointed out some YoY improvements in the quarter. Consolidated operating income rose 9% YoY to $241 million thanks to a 21% rise in HDFS, its financing division. HDFS's operating income grew 2% YoY, while LiveWire's operating loss was $4 million less than the year-ago period.
High interest rate impacts were felt, but U.S. motorcycle sales were slightly positive over the last year. Internationally, EMEA saw retail sales fall by 1%. Asia Pacific showed the most weakness, with sales plunging 16% YoY, primarily in China. In North America, including Canada, sales fell 1%, and in Latin America was flat. Zeitz pointed out that the average Harley-Davidson customer is 45, adding that they expect customers to age into their products while building brand awareness.
Harley-Davidson analyst ratings and price targets are at MarketBeat. There are seven analyst ratings on HOG stock, comprised of five Buys and two Holds. The stock has a 22.57% upside to the consensus price target of $45.14.
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Cruise Line Stock Sinks Despite Beating EPS and Raised Guidance
Cruise line operator Royal Caribbean Cruises Ltd. (NYSE: RCL) is proving to be in a class all by itself. The company crushed EPS estimates again and raised top and bottom line forecasts again. However, instead of surging to new 52-week highs, a sell-the-news reaction triggered, sending shares lower by 7.5% following its second-quarter earnings release. This doesn’t bode well for its competitors’ stocks, who are still trying to recover back to pre-pandemic levels. The selling reaction could reflect a sentiment shift in the travel and leisure industry or a buying opportunity for investors who have been waiting for a deep pullback.
Royal Caribbean operates in the consumer discretionary sector, competing with cruise operators, including Carnival Co. & plc (NYSE: CCL), Norwegian Cruise Line Holdings Ltd. (NYSE: NCLH), and Viking Holdings Ltd. (NYSE: VIK).
Royal Caribbean Operates Under 3 Brands
While Royal Caribbean is named after its flagship Royal Caribbean International cruise line, it also owns and operates two luxury cruise lines, Celebrity Cruises and Silversea Cruises. Each brand caters to a different market and price point.
Royal Caribbean International caters to families and young adults with a growing share of Millennial and Gen-Z travelers. They have mega-ships, including Icon of the Seas, which is the world’s largest, with all the amenities ranging from water parks to entertainment venues, rollercoasters, and the whole gamut of dining options.
Celebrity Cruises caters to upscale travelers, offering a more sophisticated and refined cruising experience. Their modern contemporary ships focus on culinary experiences with an emphasis on personalized services at a premium.
Silversea Cruises caters to high-income affluent travelers who are paying for exclusive and personalized experiences. Their ships are smaller and more intimate, featuring amenities like butler service, fine dining, and all-inclusive open bars. This brand has the highest price point among the three brands.
RCL Triggers a Rising Wedge Breakdown
The daily candlestick chart for RCL demonstrates the effect of a rising wedge breakdown pattern. This pattern is comprised of converging rising upper and lower trendlines. The breakdown occurs when the stock falls below the lowering ascending trendline. RCL triggered the breakdown heading into its Q2 2024 earnings release, accelerating the selling despite the solid EPS beat and raised guidance. The daily relative strength index (RSI) fell to and stalled at the 41-band, potentially attempting to bounce. Pullback support levels are at $152.05, $146.67, $141.70, and $136.32.
Royal Caribbean Posts Strong Q2 2024 Results and Reinstates Dividend
The company reported Q2 2024 EPS of $3.32, beating consensus analyst estimates by 45 cents. Stronger pricing, increased close-in demand, and continued strength in onboard revenues drove the gains. Revenues surged 16.4% YoY to $4.1 billion, beating $4.05 billion consensus estimates. Gross margin yields were up 24.2%. Net yields were up 13.3%.
Royal Caribbean's Board of Directors reinstated the dividend and declared a 40-cent per share dividend payable to shareholders of record at the close of Sept. 20, 2024. Load factors rose 108% in the quarter, indicating strong demand and overbooked cabins due to last-minute cancellations. Gross cruise costs per available passenger cruise days (APCD) rose 4.9% YoY, and net cruise costs (NCC) rose 5.5% as reported. The company closed the quarter with a total liquidity of $3.8 billion, including cash, cash equivalents, and an undrawn credit revolver. Leverage is expected to fall below 3.5x by year's end.
Achieving the Trifecta Goals Ahead of Schedule
Royal Caribbean set out to achieve three goals: triple-digit adjusted EBITDA per APCD, double-digit adjusted EPS, and hit return on invested capital (OIC) in the teens. The trifecta goals were achieved 18 months ahead of schedule.
Bookings and Onboard Revenue was Robust
The demand and pricing environment continues to remain strong since its last quarter. Booking volumes were higher than a year ago and at higher prices. Royal Caribbean continues to be in a record-booked position for 2024 sailings. Consumer onboard spending and pre-cruise purchases continue to significantly exceed 2023 levels, driven by greater participation at higher prices.
Royal Caribbean Raises Full-Year 2024 Guidance
The company raised its full-year 2024 EPS to $11.35 to $11.45, up from $11.09 previously and up 68% YoY. Net yields are expected to increase from 10.4% to 10.9%. NCC, excluding fuel per APCD, is expected to increase by around 6%. Net yields are expected to rise around 6.5% to 7%, driven by the strength in Alaskan and European itineraries. The company expects Q3 2024 adjusted EPS between $4.90 to $5.00
Royal Caribbean CEO Jason Liberty commented, "Our momentum continues! We met our financial targets 18 months earlier than expected, have our balance sheet in a strong position, reinstated our dividend, and... we are just getting started."
Royal Caribbean analyst ratings and price targets are at MarketBeat. There are 16 analyst ratings on RCL stock, comprised of 14 Buys and two Holds, with a 12.17% upside to the consensus price target of $172.25.
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