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Should You Buy, Sell or Hold Lilly (LLY) Ahead of Q2 Earnings?
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Eli Lilly and Company (LLY - Free Report) will report its second-quarter 2024 earnings on Aug 8, before market open. The Zacks Consensus Estimate for sales and earnings is pegged at $9.83 billion and $2.64 per share, respectively. Earnings estimates for Lilly have risen from $13.61 to $13.79 per share over the past 30 days. For 2025, earnings estimates have risen from $19.27 to $19.44 per share over the same timeframe.
Image Source: Zacks Investment Research
Earnings Surprise History
The healthcare bellwether’s performance has been solid, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 58.59%, on average. In the last reported quarter, the company delivered an earnings surprise of 1.98%, as seen in the chart below.
Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1, #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping the Upcoming Results
In the second quarter, top-line growth is expected to have been driven by strong demand for Lilly’s FDA-approved tirzepatide medicines, diabetes drug Mounjaro and weight loss medicine, Zepbound.
Mounjaro was launched in mid-2022, while Zepbound was launched in November 2023.
The Zacks Consensus Estimate for Mounjaro sales is $2.34 billion, while our model estimate is $2.46 billion. Our model estimate for Zepbound is $700 million.
Continued supply constraints for incretin-based products like Mounjaro and Zepbound have been hurting sales as demand exceeds supply. These delays are expected to have continued to hurt volumes in the second quarter.
Higher demand and volume growth for Lilly’s key growth drugs (select products launched prior to 2022 like Cyramza, Emgality, Jardiance, Olumiant, Retevmo, Taltz, Trulicity, Tyvyt and Verzenio) are likely to have provided top-line support, driven by increased demand trends. Particularly, Verzenio and Jardiance sales are expected to have been strong.
While volumes are expected to have increased for most drugs, lower realized prices are likely to have continued to hurt sales of most drugs like Trulicity. Sales of Trulicity are likely to have been hurt by lower volumes and increased competition.
The Zacks Consensus Estimate for Trulicity, Taltz, Verzenio, Jardiance, Olumiant and Emgality is $1.25 billion, $758.0 million, $1.24 billion, $792 million, $238 million and $157 million, respectively.
Our estimates for Trulicity, Taltz, Verzenio, Jardiance, Olumiant, and Emgality are $1.29 billion, $764 million, $1.28 billion, $818.8 million, $234.0 million and $157.9 million, respectively.
Lilly is investing in new advanced manufacturing plants and lines in the United States and in Europe to increase the supply of incretin-based products like Zepbound and Mounjaro to meet rising demand. However, it will take time to bring the increased capacity fully online. Lilly expects production for incretin-based products to increase from the second half of 2024.
Newer products (products launched from 2022 onwards) like Ebglyss, Jaypirca and Omvoh are likely to have contributed to sales growth.
Sales of most established drugs like Forteo, Humalog and Humulin are likely to have declined in the quarter.
Last month, Lilly won a long-awaited FDA approval for donanemab, to be sold under the brand name Kisunla, for treating early symptomatic Alzheimer's disease. The approval was kind of expected an FDA committee assessing the safety and effectiveness of donanemab voted 11-0, unanimously recommended its approval in June. Kisunla’s BLA was based on data from the TRAILBLAZER-ALZ 2 phase III study. Lilly is expected to discuss the commercialization plans for Kisunla on the second-quarter conference call.
Higher marketing, selling and administrative expenses to support the launch of new products and indications are likely to have hurt operating profits in the quarter.
Nonetheless, a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell or hold Lilly’s stock.
Price Performance and Valuation
The stock is trading at a premium to the industry, as seen in the chart below.
Lilly’s Stock Valuation
Image Source: Zacks Investment Research
Lilly’s stock has gone up by 640% in the past five years mainly due to its solid pipeline potential, particularly its obesity drugs.
Year to date, Lilly’s stock has risen 38.0% compared with an increase of 18.8% for the industry. The stock has also outperformed the sector as well as the S&P 500.
LLY Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
The only other large drugmaker to have generated such phenomenal returns, also gaining from the GLP-1 segment’s popularity, is Novo Nordisk (NVO - Free Report) . The stock has risen 432% in the past five years, mainly on the success of its drug semaglutide, a direct competitor to Lilly’s tirzepatide medicines. Semaglutide is approved as Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes and as Wegovy injection for weight management.
Investment Thesis
Lilly has seen unparalleled success with Mounjaro and Zepbound. Despite a short time on the market, Mounjaro and Zepbound have become key top-line drivers for Lilly, with demand for weight loss drugs rising rapidly. Tirzepatide is also being developed for other indications, including obstructive sleep apnea (OSA) and metabolic dysfunction-associated steatohepatitis.
Recent data from clinical studies on heart failure with preserved ejection fraction and obesity showed that tirzepatide reduced the risk of heart failure outcomes — heart failure urgent visit or hospitalization, oral diuretic intensification or cardiovascular death — by 38% compared to placebo. Clinical studies on OSA have shown that tirzepatide has reduced sleep apnea events in people with obesity. Approval for these expanded indications can further boost sales.
In the past couple of years, Lilly has received approvals for several new drugs and witnessed pipeline and regulatory success.
Other than Mounjaro and Zepbound, Lilly gained approvals for some other new drugs in the past year. These included Omvoh for ulcerative colitis and BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia. Lilly expects its new drugs, Mounjaro, Omvoh, Zepbound, Ebglyss and Jaypirca, to contribute significantly to its top line in 2024.
Lilly believes Kisunla can generate blockbuster sales. Kisunla is the second drug on the market to treat Alzheimer's disease. Biogen (BIIB - Free Report) and its Japan-based partner Eisai’s Leqembi was approved last year in the United States to reduce the cognitive decline associated with early Alzheimer’s disease. Leqembi is also launched in Japan and China. Though the Leqembi launch was slow, sales picked up in the first half.
Conclusion
Lilly has consistently reported strong revenues and profits and dealt well with expiring patents and increasing competition. Lilly’s revenue growth is being driven by higher demand for drugs like Mounjaro, Verzenio, Jardiance, Taltz and others. Incremental contribution for new drugs, rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s and regular M&A activity will keep the stock afloat.
Lilly is a great stock to have in one’s portfolio based on its strong overall financial performance and robust drug pipeline. Those who already own this stock should continue to retain it. Consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. Though LLY currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.
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Should You Buy, Sell or Hold Lilly (LLY) Ahead of Q2 Earnings?
Eli Lilly and Company (LLY - Free Report) will report its second-quarter 2024 earnings on Aug 8, before market open. The Zacks Consensus Estimate for sales and earnings is pegged at $9.83 billion and $2.64 per share, respectively. Earnings estimates for Lilly have risen from $13.61 to $13.79 per share over the past 30 days. For 2025, earnings estimates have risen from $19.27 to $19.44 per share over the same timeframe.
Earnings Surprise History
The healthcare bellwether’s performance has been solid, with the company exceeding earnings expectations in each of the trailing four quarters. It delivered a four-quarter earnings surprise of 58.59%, on average. In the last reported quarter, the company delivered an earnings surprise of 1.98%, as seen in the chart below.
What Does Our Model Say?
Lilly has an Earnings ESP of -3.02% and a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Per our proven model, companies with the combination of a positive Earnings ESP and a Zacks Rank #1, #2 (Buy) or #3 have a good chance of delivering an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors Shaping the Upcoming Results
In the second quarter, top-line growth is expected to have been driven by strong demand for Lilly’s FDA-approved tirzepatide medicines, diabetes drug Mounjaro and weight loss medicine, Zepbound.
Mounjaro was launched in mid-2022, while Zepbound was launched in November 2023.
The Zacks Consensus Estimate for Mounjaro sales is $2.34 billion, while our model estimate is $2.46 billion. Our model estimate for Zepbound is $700 million.
Continued supply constraints for incretin-based products like Mounjaro and Zepbound have been hurting sales as demand exceeds supply. These delays are expected to have continued to hurt volumes in the second quarter.
Higher demand and volume growth for Lilly’s key growth drugs (select products launched prior to 2022 like Cyramza, Emgality, Jardiance, Olumiant, Retevmo, Taltz, Trulicity, Tyvyt and Verzenio) are likely to have provided top-line support, driven by increased demand trends. Particularly, Verzenio and Jardiance sales are expected to have been strong.
While volumes are expected to have increased for most drugs, lower realized prices are likely to have continued to hurt sales of most drugs like Trulicity. Sales of Trulicity are likely to have been hurt by lower volumes and increased competition.
The Zacks Consensus Estimate for Trulicity, Taltz, Verzenio, Jardiance, Olumiant and Emgality is $1.25 billion, $758.0 million, $1.24 billion, $792 million, $238 million and $157 million, respectively.
Our estimates for Trulicity, Taltz, Verzenio, Jardiance, Olumiant, and Emgality are $1.29 billion, $764 million, $1.28 billion, $818.8 million, $234.0 million and $157.9 million, respectively.
Lilly is investing in new advanced manufacturing plants and lines in the United States and in Europe to increase the supply of incretin-based products like Zepbound and Mounjaro to meet rising demand. However, it will take time to bring the increased capacity fully online. Lilly expects production for incretin-based products to increase from the second half of 2024.
Newer products (products launched from 2022 onwards) like Ebglyss, Jaypirca and Omvoh are likely to have contributed to sales growth.
Sales of most established drugs like Forteo, Humalog and Humulin are likely to have declined in the quarter.
Last month, Lilly won a long-awaited FDA approval for donanemab, to be sold under the brand name Kisunla, for treating early symptomatic Alzheimer's disease. The approval was kind of expected an FDA committee assessing the safety and effectiveness of donanemab voted 11-0, unanimously recommended its approval in June. Kisunla’s BLA was based on data from the TRAILBLAZER-ALZ 2 phase III study. Lilly is expected to discuss the commercialization plans for Kisunla on the second-quarter conference call.
Higher marketing, selling and administrative expenses to support the launch of new products and indications are likely to have hurt operating profits in the quarter.
Nonetheless, a single quarter’s results are not so important for long-term investors. Let us delve deeper to understand whether to buy, sell or hold Lilly’s stock.
Price Performance and Valuation
The stock is trading at a premium to the industry, as seen in the chart below.
Lilly’s Stock Valuation
Lilly’s stock has gone up by 640% in the past five years mainly due to its solid pipeline potential, particularly its obesity drugs.
Year to date, Lilly’s stock has risen 38.0% compared with an increase of 18.8% for the industry. The stock has also outperformed the sector as well as the S&P 500.
LLY Stock Outperforms Industry, Sector & S&P 500
The only other large drugmaker to have generated such phenomenal returns, also gaining from the GLP-1 segment’s popularity, is Novo Nordisk (NVO - Free Report) . The stock has risen 432% in the past five years, mainly on the success of its drug semaglutide, a direct competitor to Lilly’s tirzepatide medicines. Semaglutide is approved as Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes and as Wegovy injection for weight management.
Investment Thesis
Lilly has seen unparalleled success with Mounjaro and Zepbound. Despite a short time on the market, Mounjaro and Zepbound have become key top-line drivers for Lilly, with demand for weight loss drugs rising rapidly. Tirzepatide is also being developed for other indications, including obstructive sleep apnea (OSA) and metabolic dysfunction-associated steatohepatitis.
Recent data from clinical studies on heart failure with preserved ejection fraction and obesity showed that tirzepatide reduced the risk of heart failure outcomes — heart failure urgent visit or hospitalization, oral diuretic intensification or cardiovascular death — by 38% compared to placebo. Clinical studies on OSA have shown that tirzepatide has reduced sleep apnea events in people with obesity. Approval for these expanded indications can further boost sales.
In the past couple of years, Lilly has received approvals for several new drugs and witnessed pipeline and regulatory success.
Other than Mounjaro and Zepbound, Lilly gained approvals for some other new drugs in the past year. These included Omvoh for ulcerative colitis and BTK inhibitor Jaypirca for mantle cell lymphoma and chronic lymphocytic leukemia. Lilly expects its new drugs, Mounjaro, Omvoh, Zepbound, Ebglyss and Jaypirca, to contribute significantly to its top line in 2024.
Lilly believes Kisunla can generate blockbuster sales. Kisunla is the second drug on the market to treat Alzheimer's disease. Biogen (BIIB - Free Report) and its Japan-based partner Eisai’s Leqembi was approved last year in the United States to reduce the cognitive decline associated with early Alzheimer’s disease. Leqembi is also launched in Japan and China. Though the Leqembi launch was slow, sales picked up in the first half.
Conclusion
Lilly has consistently reported strong revenues and profits and dealt well with expiring patents and increasing competition. Lilly’s revenue growth is being driven by higher demand for drugs like Mounjaro, Verzenio, Jardiance, Taltz and others. Incremental contribution for new drugs, rapid pipeline progress in areas like obesity, diabetes and Alzheimer’s and regular M&A activity will keep the stock afloat.
Lilly is a great stock to have in one’s portfolio based on its strong overall financial performance and robust drug pipeline. Those who already own this stock should continue to retain it. Consistently rising earnings estimates clearly highlight analysts’ optimistic outlook for further growth. Though LLY currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.