Eli Lilly and Company (LLY) is set to report second quarter 2013 results on Jul 24, before the opening bell. Last quarter it posted a positive surprise of 8.57%. Let’s see how things are shaping up for this announcement.
Factors at Play for 2Q
This global healthcare company has delivered positive earnings surprises in three of the last four quarters with an average beat of 5.13%. Eli Lilly boasts a wide range of products that serve a vast number of therapeutic areas. The company focuses primarily on central nervous system disorders, metabolic diseases, autoimmune diseases, cardiovascular diseases and cancer, which are all high growth areas and represent significant commercial potential. We are also impressed by Eli Lilly’s efforts to expand in key markets. Moreover, the company’s efforts to develop its pipeline are encouraging.
However, the patent expiration faced by several products in Eli Lilly’s portfolio is highly concerning. About 6 products, representing 60% of 2012 total revenues, are expected to lose exclusivity this year and over the next few years. The biggest near-term challenge for Eli Lilly will be to replace the revenues lost due to the Zyprexa genericization.
Our proven model does not conclusively show that Eli Lilly is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank #1, 2 or 3 for this to happen.
Zacks ESP: The ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at $1.02.
Zacks Rank #3 (Hold): Eli Lilly’s Zacks Rank #3 lowers the predictive power of ESP because the Zacks Rank #3 when combined with an ESP of 0.00% indicates the possibility of in line results.
Stocks to Consider
Here are some other stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
Forest Laboratories, Inc. (FRX) has Earnings ESP of +14.29% and holds a Zacks Rank #3. Forest Labs will be reporting first quarter fiscal 2014 (ended Jun 30, 2013) earnings on Jul 23 before the market opens.
Biogen Idec. (BIIB) has Earnings ESP of +2.19% and holds a Zacks Rank #3. Biogen will be reporting second quarter earnings on Jul 25 before the market opens.
Actavis, Inc. (ACT) has Earnings ESP of +1.01% and holds a Zacks Rank #3. Actavis will be reporting second quarter earnings on Jul 25 before the market opens.
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