Eli Lilly and Company (LLY) is engaged in the discovery, development, manufacturing, marketing, and sales of pharmaceutical products worldwide. Its subsidiaries include Acanthas Pharma, Inc., Alnara Pharmaceuticals, Inc., ARMO Biosciences, Inc., and Avid Radiopharmaceuticals, Inc.
On May 13, 2022, LLY announced that the U.S. Food and Drug Administration (FDA) approved Mounjaro (tirzepatide) injection. LLY’s President Mike Mason said, “We are thrilled to introduce Mounjaro, which represents the first new class of type 2 diabetes medication introduced in almost a decade and embodies our mission to bring innovative new therapies to the diabetes community.”
In June 2021, LLY was granted the Breakthrough Therapy designation for donanemab, an investigational antibody therapy for Alzheimer’s. On June 13, 2022, LLY and Incyte Corporation (INCY) announced the approval of OLUMIANT (baricitinib) as a first-in-disease systemic treatment for adults with severe alopecia areata.
These new drugs are expected to be revenue and earnings accretive for the company. In addition, Mounjaro was also found effective in helping people lose weight. This is expected to open a new revenue stream for LLY, provided it gets the FDA nod as a potential weight-loss treatment.
LLY’s stock has gained 11% in price year-to-date and 38.5% over the past year to close the last trading session at $306.69.
Here’s what could influence LLY’s performance in the upcoming months:
Robust Financials
LLY’s revenue increased 14.7% year-over-year to $7.81 billion for the first quarter ended March 31, 2022. The company’s non-GAAP net income increased 61.9% year-over-year to $2.37 billion. Also, its non-GAAP EPS came in at $2.62, representing an increase of 62.7% year-over-year.
Favorable Analyst Estimates
Analysts expect LLY’s revenue for fiscal 2022 and 2023 to increase 7.6% and 4.8% year-over-year to $27.58 billion and 28.91 billion, respectively, while its EPS for fiscal 2022 and 2023 are expected to increase 6.6% and 14.3% year-over-year to $7.88 and $9.01, respectively.
High Profitability
In terms of trailing-12-month gross profit margin, LLY’s 75.56% is 37.2% higher than the 55.04% industry average. Likewise, its 0.63% trailing-12-month asset turnover ratio is 77.6% higher than the industry average of 0.35%. Also, its 30.99% trailing-12-month EBIT margin is 3,053.9% higher than the 0.98% industry average.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROA came in at 75.53%, 22.99%, and 13.06%, compared to the negative industry averages.
POWR Ratings Show Promise
LLY has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. LLY has a B grade for Quality, in sync with its 36.56% trailing-12-month EBITDA margin, which is 827.1% higher than the 3.94% industry average.
It has a B grade for Stability, consistent with its 0.40 beta.
LLY is ranked #14 out of 168 stocks in the Medical – Pharmaceuticals industry. Click here to access LLY’s Growth, Value, Momentum, and Sentiment ratings.
Bottom Line
LLY’s new drug approvals for type 2 diabetes and severe alopecia areata are expected to drive revenues and earnings growth for the company. The investment case also gets bolstered given its robust financials, favorable analyst estimates, and higher-than-industry profitability. So, we think adding this stock to your portfolio could be wise.
How Does Eli Lilly and Company (LLY) Stack Up Against its Peers?
LLY has an overall POWR Rating of B, equating to a Buy rating. You might want to consider investing in the following Medical – Pharmaceuticals stocks with an A (Strong Buy) or B (Buy) rating: Merck & Co., Inc. (MRK), Novartis AG (NVS), Zoetis Inc. (ZTS).
LLY shares fell $0.86 (-0.28%) in premarket trading Thursday. Year-to-date, LLY has gained 11.56%, versus a -20.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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