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Lilly (LLY) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Eli Lilly and Company LLY will report fourth-quarter and full-year 2019 results on Jan 30, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 3.50%.

Lilly’s shares have risen 20.9% in the past year compared with the industry’s increase of 16.1%.

 

Lilly’s earnings performance has been mixed. Its earnings beat expectations in three of the last four quarters, with the average positive surprise being 1.20%.

Eli Lilly and Company Price and EPS Surprise

 

Eli Lilly and Company Price and EPS Surprise

Eli Lilly and Company price-eps-surprise | Eli Lilly and Company Quote

Let’s see how things have shaped up for this announcement.

Factors to Consider

Like the previous few quarters, strong demand for Trulicity, Taltz, Jardiance, Basaglar, Olumiant and Verzenio as well as new migraine drug, Emgality is likely to have driven sales in the fourth quarter, making up for the decline in sales of established products like Cialis due to loss of exclusivity and the impact of Lartruvo’s product withdrawal. Lilly suspended promotion of its advanced soft tissue sarcoma drug, Lartruvo due to the failure of the ANNOUNCE confirmatory study.

However, rising pricing pressure in the United States due to rebates and legislated increases in Medicare Part D cost sharing, price cuts in some international market and currency headwinds are expected to have negatively impacted the top line in the fourth quarter of 2019.

Importantly, lower realized prices in the United States due to the abovementioned factors hurt sales of key drugs Trulicity and Taltz in the third quarter. However, on the third-quarter conference call, the company had said that that the negative factors, which hurt sales of Trulicity in the third quarter, should moderate substantially as impacts from the donut hole diminish in the fourth quarter. An update is expected on the conference call.

Investors will be keen to know the sales numbers of Lilly’s newly approved drugs in the fourth quarter. Key new drug approvals in the United States in 2019 included Baqsimi, Lilly’s glucagon nasal powder to treat severe hypoglycemia in diabetes patients in July and Reyvow (lasmiditan) oral tablets to treat acute migraine in October.

Key Recent Developments

Earlier this month, Lilly announced a definitive deal to buy dermatology company, Dermira DERM for $18.75 per share in cash or approximately $1.1 billion. The deal will add Dermira’s promising interleukin inhibitor in late-stage development for atopic dermatitis/eczema, lebrikizumab, thereby expanding Lilly’s immunology pipeline.

In December, Lilly issued a better-than-expected financial guidance for 2020. It anticipates adjusted earnings of $6.70-$6.80 per share in 2020. Revenues in 2020 are expected in the range of $23.6-$24.1 billion.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Lilly this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP: Its Earnings ESP is -0.33%. The Zacks Consensus Estimate is pegged at $1.52. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Lilly carries a Zacks Rank #2.

Stocks to Consider

Here are some large drug stocks that have the right combination of elements to beat on earnings in their upcoming release:

Merck MRK has an Earnings ESP of +1.05% and a Zacks Rank #3. The company is scheduled to release results on Feb 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Novartis NVS has an Earnings ESP of +3.34% and a Zacks Rank #3.  The company is scheduled to release results on Jan 29.

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