LLY Earnings Preview- Does the weight-loss drug investment craze hit a brick wall?
Eli Lilly (LLY) is set to report its Q2 earnings tomorrow morning, with analyst expectations pegged at $9.95 billion for revenue and $2.74 for EPS. The market will be closely watching for updates on the company’s weight loss drug shortages, as CEO David Ricks has recently indicated that the shortages will be resolved "real soon."
According to J.P. Morgan, expectations for Q2 are slightly below consensus due to anticipated lower sales for Trulicity, though this is expected to be offset by strong performance from Mounjaro and Zepbound. JPMC remains optimistic about Eli Lilly's long-term growth, particularly driven by the incretin franchise, which includes Mounjaro and Zepbound. The firm highlights potential catalysts such as upcoming health outcomes data for tirzepatide, manufacturing capacity improvements, and clinical trial results for orforglipron and retatrutide.
Wells Fargo's analysis suggests a strong beat for Mounjaro in the U.S., estimating sales between $2.19 billion and $2.26 billion, which would significantly surpass the consensus of $1.94 billion. Zepbound is expected to perform in line with estimates, potentially offsetting the expected decline in Trulicity sales. The analysts emphasize that supply chain improvements will be crucial for any potential guidance updates, with pricing also playing a key role in their calculations. Overall, despite the supply challenges, both JPMC and Wells Fargo see a strong outlook for Eli Lilly, driven by its robust diabetes and obesity medication portfolio.
LLY reported its Q1 2024 results, showing mixed performance in key metrics compared to analyst expectations. The company posted sales of $8.77 billion, slightly missing the FactSet consensus of $8.9 billion. Despite this top-line miss, the results were anticipated due to supply constraints in incretin production. On the other hand, LLY's adjusted EPS came in at $2.58, surpassing the FactSet estimate of $2.47, showcasing strong bottom-line performance driven by robust demand for its products.
LLY raised its 2024 revenue guidance to a range of $42.4 billion to $43.6 billion from the previous $40.4 billion to $41.6 billion, primarily due to strong performances from its drugs Mounjaro and Zepbound. The updated guidance is significantly above the FactSet consensus of $41.4 billion. Additionally, the company increased its non-GAAP EPS guidance for 2024 to $13.50-$14.00 from the prior $12.20-$12.70, reflecting confidence in sustained demand and production capacity expansion.
Analysts responded positively to the earnings report, with Cantor raising its price target to $885 from $815 and BMO increasing its target to $1001 from $900. Analysts highlighted that the earnings miss, driven by supply constraints rather than demand issues, underscores the company's strong market position and future growth potential. The supply issues are being actively addressed with significant investments in production capacity, which are expected to alleviate constraints and meet rising demand.
Key product performances varied, with Trulicity revenue falling 26% year-over-year to $1.46 billion, missing estimates of $1.67 billion, and Mounjaro revenue coming in at $1.81 billion, below the expected $2.07 billion. However, Humalog and Verzenio showed strong year-over-year growth, with Humalog revenue rising 17% to $538.7 million, surpassing the $381.8 million estimate, and Verzenio revenue increasing 40% to $1.05 billion, just shy of the $1.07 billion expectation. R&D expenses also rose 27% year-over-year to $2.52 billion, slightly above the $2.38 billion estimate, reflecting ongoing investment in future growth.
Overall, while the mixed results in individual product revenues and supply constraints led to a cautious outlook, the company's increased guidance and strong bottom-line performance indicate a positive trajectory. The market's reaction, with a 7% rise in shares premarket, suggests confidence in Eli Lilly's ability to overcome short-term challenges and capitalize on its robust product pipeline and market demand.