Eli Lilly (NYSE: LLY) fourth-quarter performance exceeded the street expectations, with the company delivering adjusted earnings of $5.32 per share versus the projected $4.95. Revenue came in at $13.5 billion, slightly below the consensus estimate of $13.6 billion. Lower price realization for Mounjaro led to a top-line miss. As an aside, see What’s Next for HON Stock?
Eli Lilly’s outlook aligned with the analysts estimates. This boded well with the investors, and the stock trended higher after the results’ announcement. Now, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.
Eli Lilly’s revenue of $13.5 billion reflected a solid 45% y-o-y growth, thanks to the high demand for its obesity drug – Zepbound – which garnered $1.9 billion in sales. Among other drugs, Mounjaro sales were up 60% y-o-y to $3.5 billion, while Verzenio saw a 36% jump to $1.6 billion. Notably, both Zepbound and Mounjaro sales fell short of the consensus estimates of $1.98 billion and $3.6 billion, respectively. While Mounjaro’s sales demonstrated strong growth, pricing challenges tempered its overall performance.
Eli Lilly also posted a 90 bps improvement in gross margin to 83.2% in Q4. Higher revenues clubbed with margin expansion resulted in earnings of $5.32 per share, up over 2x from the $2.49 figure in the prior-year quarter. Looking forward, the company expects its top-line to be in the range of $58 billion and $61 billion, gross margin between 41.5% and 43.5%, and the adjusted earnings to be between $22.50 and $24.00.
LLY has delivered impressive returns of 50% year-to-date, significantly outpacing the S&P 500’s 28% gain in the same period. The investor optimism stems from massive demand for its obesity treatment. Admirably, LLY stock has generated better returns than the broader market in each of the last four years. Returns for the stock were 66% in 2021, 34% in 2022, 61% in 2023, and 33% in 2024.
Similarly, the Trefis High Quality Portfolio, with a collection of 30 stocks, is less volatile, and it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Given the current uncertain macroeconomic environment around rate cuts and changes in the White House, could LLY continue to outperform? From a valuation perspective, we think LLY stock has some room for growth. At its current levels of $870, LLY stock trades at 17x trailing revenues, versus the stock’s average P/S ratio of 14x over the last three years. Now, a rise in valuation multiple for LLY seems justified, given the strong sales growth as well as robust outlook in the coming years. Notably, the $980 average of analysts price estimate for LLY reflects a 12% upside from here.
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While LLY stock looks like it can see higher levels, it is helpful to see how Eli Lilly peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.
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