Eli Lilly Stock Before Q4 Earnings: To Buy or Not to Buy?

Eli Lilly and Company LLY will report its fourth-quarter and full-year 2024 earnings on Feb. 6, before market open. The Zacks Consensus Estimate for sales and earnings is pegged at $13.72 billion and $5.15 per share, respectively. Earnings estimates for 2025 have declined from $24.05 to $23.57 per share over the past 30 days.Image Source: Zacks Investment ResearchFind the latest EPS estimates and surprises on Zacks Earnings Calendar.LLY’s Earnings Surprise HistoryThe healthcare bellwether’s performance has been mixed, with the company exceeding earnings expectations in three of the trailing four quarters. It delivered a four-quarter earnings surprise of 7.23%, on average. In the last reported quarter, the company delivered a negative earnings surprise of 22.37%, as seen in the chart below.Image Source: Zacks Investment ResearchWhat Does Our Model Say for Lilly?Lilly has an Earnings ESP of -2.08% 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 LLY’s Upcoming ResultsIn the fourth quarter, top-line growth is expected to have been driven by demand growth for Lilly’s FDA-approved tirzepatide medicines, diabetes drug Mounjaro and weight loss medicine, Zepbound.However, in mid-January, Lilly lowered its sales guidance for full-year 2024 and announced disappointing preliminary sales numbers for the fourth quarter. Lilly expects revenues to be approximately $45.0 billion in full-year 2024, which falls short of its previous guidance range of $45.4 billion to $46.0 billion.In the fourth quarter, revenues are expected to be approximately $13.5 billion, falling short of the consensus estimate due to lower-than-expected sales of Mounjaro and Zepbound. In addition, lower-than-expected channel inventory at year-end also hurt sales of these incretin-based medicines.Lilly said it generated approximately $3.5 billion in sales from Mounjaro and $1.9 billion from Zepbound, which fell short of the consensus estimate. Per the company, its previous guidance had assumed a “faster acceleration of growth” for Mounjaro and Zepbound in the fourth quarter.Quarter-over-quarter growth of Zepbound and Mounjaro in 2024 was impacted by supply and channel dynamics.However, the company said it is hopeful that sales of Mounjaro and Zepbound should pick up in 2025 as it launches the drugs in new international markets and ramps up manufacturing in the first half of the year. Lilly expects to produce at least 60% more salable doses of incretins in the first half of 2025 compared to last year. An update is expected on the fourth-quarter conference call.The Zacks Consensus Estimate for Mounjaro and Zepbound is pegged at $3.88 billion and $2.04 billion, respectively. Our estimates for Mounjaro and Zepbound are $3.65 billion and $2.0 billion, respectively.Higher demand and volume growth for Lilly’s key growth drugs like Emgality, Olumiant, Retevmo, Taltz and Verzenio are likely to have provided top-line support in the fourth quarter, driven by increased demand trends. However, sales of Jardiance declined in the third quarter as increased demand was offset by lower realized prices. It remains to be seen if Jardiance’s sales improved in the fourth quarter.While volumes are expected to have increased for most drugs, lower realized prices are likely to have continued to hurt sales of most drugs. Sales of Trulicity are likely to have been hurt by competitive dynamics and supply constraints.The Zacks Consensus Estimate for Trulicity, Taltz, Verzenio, Jardiance, Olumiant and Emgality is $1.35 billion, $943.0 million, $1.52 billion, $875 million, $254 million and $184 million, respectively.Our estimates for Trulicity, Taltz, Verzenio, Jardiance, Olumiant and Emgality are $1.45 billion, $947.9 million, $1.57 billion, $887.3 million, $252.2 million and $176.1 million, respectively.Newer products (products launched from 2022 onwards) like Ebglyss, Jaypirca and Omvoh are likely to have contributed to sales growth.Sales of the new Alzheimer’s drug Kisunla (donanemab) are likely to have been much higher than the third-quarter number of $1.4 million. Kisunla was approved in China in December 2024 which should contribute to sales growth in 2025.Sales of most established drugs like Forteo, Alimta and Humulin are likely to have declined in the quarter. Humalog sales might have increased in the quarter.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.LLY’s Price Performance and ValuationLilly’s stock has risen 14.9% in the past year compared with a decrease of 2.5% for the industry.LLY Stock Performance     Image Source: Zacks Investment ResearchThe stock is trading at a premium to the industry, as seen in the chart below.LLY Stock ValuationImage Source: Zacks Investment ResearchOur Investment Thesis on LLY StockDespite such a short time on the market, Mounjaro and Zepbound became key top-line drivers for Lilly in 2024, with demand rising rapidly.However, slower-than-expected growth and unfavorable channel dynamics hurt sales of Mounjaro and Zepbound in the second half, raising concerns about moderating demand for these drugs.Nonetheless, though sales of Mounjaro and Zepbound were slower than expected in the second half of 2024, Lilly is hopeful that sales will pick up in 2025 as it launches the drugs in new international markets and ramps up manufacturing in the first half of the year.Also, tirzepatide, the ingredient in Mounjaro and Zepbound, is being developed for other indications. In late December, the FDA approved Zepbound for its second indication, moderate-to-severe obstructive sleep apnea (OSA) in adults with obesity. Approvals for expanded indications and in additional geographies can further boost sales.Lilly’s other new drugs like Omvoh, Jaypirca and Ebglyss, contributed significantly to top-line growth in 2024, with the trend expected to continue in 2025.However, the obesity market is heating up and is expected to expand to $100 billion by 2030, according to data from Goldman Sachs. Lilly and Novo Nordisk NVO are presently dominating the market with Zepbound and Wegovy (semaglutide), respectively. However, several companies like Amgen AMGN and Viking Therapeutics VKTX are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline.AMGN and VKTX’s products can pose strong competition to Mounjaro/Zepbound and NVO’s Ozempic/Wegovy in the future.Stay Invested in LLY’s StockThough the disappointing sales of Mounjaro and Zepbound in the second half of 2024 created a bearish sentiment around LLY stock, we believe that over time, the supply issues for Mounjaro and Zepbound should be resolved as the company increases production capacity. Also, Lilly looks well placed to get approval for several new drugs and label expansions for marketed drugs, including Mounjaro and Zepbound, in the next few years.Though the stock looks quite expensive, we suggest investors hold it for now as it still has robust growth prospects.Only $1 to See All Zacks' Buys and SellsWe're not kidding.Several years ago, we shocked our members by offering them 30-day access to all our picks for the total sum of only $1. No obligation to spend another cent.Thousands have taken advantage of this opportunity. Thousands did not - they thought there must be a catch. Yes, we do have a reason. We want you to get acquainted with our portfolio services like Surprise Trader, Stocks Under $10, Technology Innovators,and more, that closed 228 positions with double- and triple-digit gains in 2023 alone.See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Novo Nordisk A/S (NVO): Free Stock Analysis Report Eli Lilly and Company (LLY): Free Stock Analysis Report Amgen Inc. (AMGN): Free Stock Analysis Report Viking Therapeutics, Inc. (VKTX): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks