Back to top

Image: Bigstock

Will Eli Lilly (LLY) Beat Estimates This Earnings Season?

Read MoreHide Full Article

We expect Eli Lilly & Company (LLY - Free Report) to beat expectations when it reports fourth-quarter and full-year 2020 results on Jan 29, before market open. In the last-reported quarter, the company delivered a negative earnings surprise of 12.5%.

This large drugmaker’s performance has been mixed, with earnings beat in three of the trailing four quarters. The company delivered a four-quarter earnings surprise of 8.46%, on average.

Lilly’s stock has risen 49.1% in the past year compared with an increase of 8.5% for the industry.



Factors to Consider

In the fourth quarter, Lilly expects year-over-year sales growth to be between 8% and 9% driven by higher volume trends and limited price impacts

Lilly’s new patient starts recovered in the third quarter as economies re-opened globally. New prescription volume for its key products in the United States is expected to have improved in the fourth quarter despite rising infection rates as the company believes doctors will utilize telehealth or in-person visits to see patients.

Higher demand for its growth drugs including Trulicity, Taltz, Jardiance, Verzenio, Cyramza, Olumiant, Emgality, as well as potential revenues from new products like Retevmo and Baqsimi is likely to have provided top-line support.

The Zacks Consensus Estimate for key drugs, Trulicity, Taltz and Jardiance are $1.49 billion, $555.0 million and $347 million, respectively.

Sales of older products like Cialis and Forteo are expected to have been hurt by loss of exclusivity. Sales of key drug Basaglar declined in the third quarter due to lower realized prices and weak demand caused by competitive pressure. It remains to be seen if sales trends improved in the fourth quarter. The Zacks Consensus Estimate for Basaglar is $326 million.

Generic competition for several drugs, rising pricing pressure in the United States due to rebates and legislated increases in Medicare Part D cost sharing, price reductions from increased utilization of patient affordability programs, and price cuts in some international markets like China, Japan and Europe are expected to have negatively impacted the top line in the fourth quarter of 2020.

Importantly, in the fourth quarter, Lilly is likely to have recorded some revenues from its COVID-19 therapies that were approved in November.

R&D costs are expected to be higher in the fourth quarter due toCOVID-19 research costs.

Key Recent Developments

In November, the FDA granted emergency use authorization (EUA) to Lilly’s antibody drug, bamlanivimab (LY-CoV555) to treat mild-to-moderate COVID-19 illness at high risk of progressing to severe COVID-19. The FDA also granted EUA to Lilly and Incyte’s (INCY - Free Report) oral JAK inhibitor Olumiant for use in combination with Gilead’s (GILD - Free Report) remdesivir to treat hospitalized COVID-19 patients. Meanwhile, other studies are ongoing on bamlanivimab in other patient populations and also in combination with Lilly’s another COVID-19 antibody candidate, etesevimab.

In December, Lilly announced a definitive agreement to acquire Prevail Therapeutics for $22.50 per share in cash or an aggregate value of $880 million. The acquisition will add Prevail’s promising gene-therapy candidates, targeting neurodegenerative diseases, to Lilly’s portfolio. The acquisition closed last week.

In December, Lilly issued a better-than-expected financial guidance for 2021. Lilly expects adjusted earnings in the range of $7.75-$8.40 per share in 2021. Revenuesin 2021 are expected in the range of $26.5billion-$28.0 billion.Lilly expects revenues in the range of $1-$2 billion from COVID-19 therapies.

Lilly also raised its previously issued 2020 adjusted earnings and sales outlook. Lilly now expects full-year earnings in the range of $7.45- $7.65, up from the prior expectations of $7.20-$7.40. Revenues are expected in the range of $24.2-$24.7 billion, up from the prior expectation of $23.7-$24.2 billion. Expectations for higher bamlanivimab sales due to an additional purchase agreement signed with the U.S. government in December led to the guidance increase

Earnings Whispers

Our proven model predicts an earnings beat for Lilly in the soon-to-be-reported quarter because it has the right combination of the two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely positive surprise.

Earnings ESP: Lilly’s Earnings ESP is +0.43% as the Most Accurate Estimate of $2.35 is pegged higher than the Zacks Consensus Estimate of $2.34. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lilly has a Zacks Rank #3

Another Stock to Consider

Here is a large drug stock that has the right combination of elements to beat on earnings this time around:

Merck (MRK - Free Report) has an Earnings ESP of +2.21% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>

Published in