Eli Lilly & Co. (LLY) Earnings Forecast

Pharmaceutical major Eli Lilly and Company (LLY) is scheduled to release its third-quarter results on November 2. While its earnings are expected to decline year-over-year, its revenue will likely improve.

In this piece, I have discussed why waiting for an opportune entry point in the stock could be wise.

For the third quarter, LLY’s EPS is expected to decline 56% year-over-year to $0.87. Its revenue for the same quarter is expected to increase 29.5% year-over-year to $8.99 billion.

The company expects its GAAP and non-GAAP financial results for the third quarter to include acquired IPR&D charges of approximately $2.98 billion on a pre-tax basis, representing a charge of approximately $3.30 to both GAAP and non-GAAP EPS.

The Indianapolis, Indiana-based company’s revenue is expected to have been driven by solid volume growth of Mounjaro, cancer treatment drug Verzenio, diabetes drug Jardiance, autoimmune medicine Taliz, and Olumiant. Similar to the second quarter, lower realized prices during the third quarter are expected to have hurt sales of most of the drugs.

The demand for Trulicity and Mounjaro has been so high that the company has struggled to supply the drugs. To address the strong demand, LLY is developing new diabetes manufacturing sites in North Carolina and Indiana. Once these facilities come online, the capacity of Mounjaro and Trulicity will double from last year’s baseline.

On October 3, 2023, LLY announced the acquisition of POINT, a radiopharmaceutical company with a pipeline of clinical and preclinical-stage radioligand therapies in development for cancer treatment.

Jacob Van Naarden, President of Loxo@Lilly, the oncology unit of LLY, said, “We are excited by the potential of this emerging modality and see the acquisition of POINT as the beginning of our investment in developing multiple meaningful radioligand medicines for hard-to-treat cancers as we have done in small molecule and biologic oncology drug discovery and development.”

On October 26, 2023, LLY announced that the U.S. FDA approved Omvoh (mirikizumab-mrkz) infusion (300 mg/15 mL)/injection (100 mg/mL), the first and only interleukin-23p19 (IL-23p19) antagonist for the treatment of moderately to severely active ulcerative colitis in adults.

LLY’s stock has performed strongly, gaining 61% over the past nine months and 53% over the past year to close the last trading session at $553.93.

Here’s what could influence LLY’s performance in the upcoming months:

Robust Financials

LLY’s revenue for the fiscal second quarter ended June 30, 2023, 28.1% year-over-year to $8.31 billion. Its non-GAAP gross margin rose 28% over the prior-year quarter to $6.63 billion. The company’s non-GAAP net income increased 68.3% year-over-year to $1.90 billion. In addition, its non-GAAP EPS came in at $2.11, representing an increase of 68.8% year-over-year.

Mixed Analyst Estimates

Analysts expect LLY’s EPS and revenue for fiscal 2023 to increase 2.1% and 17.1% year-over-year to $8.10 and $33.43 billion, respectively. Its EPS and revenue for fiscal 2024 are expected to increase 56.2% and 16.9% year-over-year to $12.66 and $39.06 billion, respectively.

Higher-Than-Industry Profitability

In terms of the trailing-12-month EBITDA margin, LLY’s 33.08% is 533.7% higher than the 5.22% industry average. Likewise, its 28.12% trailing-12-month EBIT margin is significantly higher than the industry average of 0.24%. Furthermore, the stock’s 77.77% trailing-12-month gross profit margin is 39.6% higher than the industry average of 55.72%.

Stretched Valuation

In terms of forward EV/EBITDA, LLY’s 50.68x is 329.4% higher than the 11.80x industry average. Likewise, its 15.37x forward EV/Sales is 394.1% higher than the 3.11x industry average. Its 68.35x forward non-GAAP P/E is 283.4% higher than the 17.82x industry average.

POWR Ratings Reflect Uncertainty

LLY has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. LLY has a B grade for Stability, consistent with its 0.33 beta. Its mixed analyst estimates justify its C grade for Sentiment.

It has a B grade for Quality, in sync with its higher-than-industry profitability.

LLY is ranked #45 out of 152 stocks in the Medical - Pharmaceuticals industry. Click here to access LLY’s Growth, Value, and Momentum ratings.

Bottom Line

LLY’s stock has been performing exceptionally well as its diabetes treatment drugs, Mounjaro and Trulicity, continue to set the sales charts on fire. Its portfolio of drugs, including Mounjaro, is expected to register strong volume growth, helping drive revenue growth during the third quarter. The FDA’s recent approval of the moderate-to-severe active ulcerative colitis drug Omvoh will also drive growth for the company.

The company is also expecting Mounjaro to get FDA approval as a weight loss drug by the end of this year, which could further enhance demand for the drug. However, it faces competition from Novo Nordisk’s diabetes and weight loss drugs Wegovy and Ozempic. Moreover, given the mixed analyst estimate, the stock looks expensive at the current price level. Therefore, waiting for a lower entry point in the stock could be wise.

How Does Eli Lilly and Company (LLY) Stack Up Against Its Peers?

LLY has an overall POWR Rating of C, equating to Neutral. You may check out the stocks within the Medical – Pharmaceuticals industry possessing an A (Strong Buy) or B (Buy) rating: AbbVie Inc. (ABBV), Taro Pharmaceutical Industries Ltd. (TARO), and Dr. Reddy's Laboratories Limited (RDY). To access more Buy-rated Medical - Pharmaceuticals stocks set to outperform, click here.

What To Do Next?

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LLY shares were trading at $553.56 per share on Wednesday afternoon, down $0.37 (-0.07%). Year-to-date, LLY has gained 52.52%, versus a 10.96% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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