Eli Lilly (LLY) has experienced significant growth in its stock this year, and its upcoming earnings report has the potential to drive it even higher.
Positive Trial Results and Drug Success Drive Stock Growth
Driven by positive trial results for its Alzheimer’s drug, donanemab, as well as the success of its weight-loss drugs, Mounjaro and Jardiance, Eli Lilly shares have surged approximately 23% in 2023. In fact, the success of the latter drugs has prompted analysts to increase their 2023 earnings-per-share estimates by around 12% thus far.
High Expectations for Earnings
Analysts are anticipating sales of $7.58 billion, which would represent a year-over-year growth of 17%. Furthermore, earnings are projected to be $1.98 per share, reflecting a remarkable 58% increase thanks to expanding profit margins. These expectations are undoubtedly high, and surpassing them may prove challenging for Eli Lilly.
Overcoming Challenges
While the Alzheimer’s drug, donanemab, won’t significantly impact earnings at present, the potential market size for Alzheimer’s treatments is estimated to reach approximately $14 billion within the next decade. However, FDA approval for donanemab is still pending and expected to be granted by the end of the year. Consequently, Eli Lilly may not have any new updates regarding Alzheimer’s to share during the upcoming earnings call.
Despite potential hurdles, it is not impossible for Eli Lilly to exceed expectations. Investors eagerly await the release of its earnings report to see how the company performs.
Obesity Drugs Propel Lilly’s Sales Growth
Lilly’s obesity drugs, Mounjaro and Jardiance, are taking center stage this quarter, driving significant growth. Analysts expect these drugs to grow by 40% annually, reaching almost $17 billion in sales by the end of 2026. This growth will contribute to a projected total company sales increase of about 18% annually, amounting to $52 billion over the same period.
For the current quarter, Jardiance is expected to generate $627 million in sales, while Mounjaro is projected to achieve $740 million. According to Williams, an industry expert, the focus this quarter will be on diabetes and weight-loss drugs, with strong market expectations.
Despite concerns about valuation, the potential sales performance of these drugs could positively impact Lilly’s stock. Although Lilly stock currently trades at approximately 42 times forward earnings estimates, its price-to-earnings-growth (PEG) ratio stands at a lower level of 1.3 times expected annual earnings growth of about 31% over the next three years. This PEG ratio is also lower than Lilly’s five-year average of about 1.8 times.
As long as the market retains confidence in the company’s profit growth, it is likely to continue driving up the stock price.
