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Eli Lilly (LLY) to Report Q1 Earnings: What's in the Cards?

Kinjel Shah

Eli Lilly and Company LLY will report first-quarter 2019 results on Apr 30, before market open. In the last reported quarter, the company delivered a negative earnings surprise of 2.21%.

Lilly’s shares have risen 1.5% this year so far against the industry’s decline of 3.7%.

 

Lilly’s earnings performance has been decent. Its earnings beat expectations in three of the last four quarters, with the average positive surprise being 8.08%.

Eli Lilly and Company Price and EPS Surprise

Eli Lilly and Company Price and EPS Surprise | Eli Lilly and Company Quote

 

Let’s see how things are shaping up for this quarter.

Factors to Consider

Like the previous couple of quarters, strong uptake trends witnessed in new products like Trulicity, Jardiance, Jardiance, Taltz, Verzenio as well as the newly launched migraine drug, Emgality should make up for the decline in sales of established products like Cialis due to loss of exclusivity. However, rising pricing pressure in the United States and some international markets, currency headwinds and the impact of the failed Lartruvo study are expected to put pressure on the top line in the first quarter.

While Trulicity sales are expected to be driven by higher demand in the United States and higher volumes and realized prices in ex-U.S. markets, Jardiance sales should continue to be driven by increased demand trends within the SGLT2 class of diabetes medicines in the United States and increased volume outside the United States.

Continued strong uptake outside the United States will drive sales of Cyramza while higher demand should drive sales of Taltz, Verzenio and Basaglar. Taltz was launched for the second indication of psoriatic arthritis in late 2017/early 2018 in both the United States and Europe, which contributed to sales growth in 2018, a trend we expect to see in first-quarter 2019 results as well.

Importantly, sales of advanced soft tissue sarcoma drug Lartruvo are expected to decline sharply in the to-be-reported quarter following the suspension of promotion of the medicine due to the failure of the ANNOUNCE confirmatory study.

The loss of exclusivity for Cialis, Effient, Strattera, Zyprexa, Cymbalta, Evista and Axiron in some countries will continue to hurt volumes. Lilly lost exclusivity for Cialis in September 2018 and generic versions entered the market in the same month resulting in rapid erosion of sales.

Also, competitive pressure and loss of exclusivity in certain countries hurt Alimta sales — particularly international sales — a trend likely to impact first-quarter results.

Emgality generated U.S. revenues of $4.9 million in the fourth quarter. We expect sales to be much higher in the first quarter.

However, higher marketing costs to support Emgality’s launch as well costs related to the study failure for Lartruvo should hurt profits, to an extent, in the quarter.

Earnings Whispers

Our proven model does not conclusively show that Lilly will beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Earnings ESP: Its Earnings ESP is 0.00% as both the Zacks Consensus Estimate as well as the Most Accurate Estimate is pegged at $1.21. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lilly’s Zacks Rank #2 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some large drug stocks that have the right combination of elements to beat on earnings this time around:

Allergan plc AGN has an Earnings ESP of +1.05% and a Zacks Rank #3. The company is slated to release results on May 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

AbbVie, Inc. ABBV has an Earnings ESP of +0.76% and a Zacks Rank #3. The company is slated to release results on Apr 25.

GlaxoSmithKline plc GSK) has an Earnings ESP of +2.63% and a Zacks Rank #2. The company is slated to release results on May 1.

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