Is Eli Lilly Stock a Portfolio Must-Have Pre-Q2 Earnings?

Eli Lilly and Company LLY will report its first-quarter earnings on May 1, before market open. The Zacks Consensus Estimate for sales and earnings is pegged at $12.62 billion and $3.52 per share, respectively. Earnings estimates for 2025 have declined from $23.53 to $22.43 per share over the past 30 days. (Find the latest earnings estimates and surprises on Zacks Earnings Calendar.)Image Source: Zacks Investment ResearchLLY’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 8.47%, on average. In the last reported quarter, the company delivered an earnings surprise of 5.77%, as seen in the chart below.Image Source: Zacks Investment ResearchWhat Does Our Model Say for Lilly?Lilly has an Earnings ESP of -14.61% 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 first 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.Sales of Mounjaro and Zepbound were below expectations in the second half of 2024. Lilly believes that slower-than-expected growth and unfavorable channel dynamics hurt sales in the second half of 2024.In February, the company had 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. It remains to be seen if sales of Mounjaro and Zepbound improved in the first quarter.In late December, the FDA approved Zepbound for its second indication, moderate-to-severe obstructive sleep apnea (OSA) in adults with obesity. Approval for the new indication is likely to have contributed to Mounjaro and Zepbound’s sales growth in the quarter.Mounjaro was recently launched in China but due to supply limitations, Lilly expects a more meaningful contribution in the country from the second half of 2025.The Zacks Consensus Estimate for Mounjaro and Zepbound is $3.75 billion and $2.27 billion, respectively. Our estimates for Mounjaro and Zepbound are $3.82 billion and $2.19 billion, respectively.Higher demand and volume growth for Lilly’s key growth drugs like Emgality, Jardiance, Olumiant, Taltz, and Verzenio are likely to have provided top-line support in the first quarter, driven by increased demand trends. While volumes are expected to have increased for most drugs, lower realized prices (including U.S. Part D changes) are likely to have continued hurting sales of most drugs. In 2025, Lilly also expects an unfavorable impact from foreign exchange rates on the top line.Sales of Trulicity are likely to have been hurt by competitive dynamics and lower realized prices in the United States. Sales of Trulicity are also being hurt by patient switches to Mounjaro.The Zacks Consensus Estimate for Trulicity, Taltz, Verzenio, Jardiance, Olumiant and Emgality is $1.11 billion, $663.0 million, $1.25 billion, $675 million, $228 million and $220 million, respectively.Our estimates for Trulicity, Taltz, Verzenio, Jardiance, Olumiant, and Emgality are $1.17 billion, $659 million, $1.23 billion, $775.8 million, $240.3 million and $277.8 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 improved sequentially. 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 14.8% so far this year compared with an increase of 1.5% for the industry. The stock has also outperformed the sector & the S&P 500 index.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 being on the market for less than three years, Mounjaro and Zepbound became key top-line drivers for Lilly, 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 their sales will pick up in 2025 as it ramps up manufacturing capacity and through label and geography expansions.Approvals for new indications can also drive sales of Mounjaro and Zepbound higher. 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.Lilly has its share of problems. Sales of its key medicine, Trulicity, are declining in the United States due to competitive dynamics, including Mounjaro switches and supply constraints. Prices of most of Lilly’s products are declining in the United States. Potential competition in the GLP-1 diabetes/obesity market is another headwind.Lilly and Novo Nordisk NVO are presently dominating the obesity 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. Others like Roche, Merck and AbbVie are also looking to enter the obesity space by in-licensing obesity candidates from smaller biotechs, which could threaten Novo Nordisk and Eli Lilly’s dominance in the market.Though competition is heating up in the diabetes and obesity space, Lilly is investing broadly in obesity and has several new molecules currently in clinical development to further strengthen its position in the rapidly growing market. In an encouraging development, last week, Lilly announced positive data from a phase III study evaluating its next-generation once-daily oral GLP-1 agonist, orforglipron, in patients with type II diabetes and obesity. In the study, the oral pill performed on par with the NVO’s popular GLP-1 injection for diabetes, Ozempic, in reducing both weight and blood sugar levels in patients with type II diabetes.Stay Invested in LLY’s StockDespite its expensive valuation, we suggest investors retain this stock as it is the largest drugmaker currently and has robust growth prospects.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. See them 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 ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks