Eli Lilly and Company LLY is set to report first quarter 2015 earnings results on Apr 23 before the market opens. The company’s performance in 2014 has been a mix of in-line and positive earnings surprises. Overall, the company posted an average positive earnings surprise of 1.1% over the past four quarters.
Let’s see how things are shaping up for the company this quarter.
Generics Still a Threat, Currency a Headwind
While Eli Lilly’s top-line will remain under pressure due to the loss of exclusivity of key products like Evista and Cymbalta, products like Humalog, Cialis, Forteo, Trajenta, Effient and Strattera should provide some support. Moreover, Animal Health segment revenues should benefit from the acquisition of the Novartis NVS animal health business earlier this year.
Sales should also benefit from contribution from new products like Cyramza and Trulicity. Eli Lilly launched another diabetes treatment, Glyxambi (a SGLT2/DPP-4 combination treatment), in late Mar 2015.
However, currency will once again affect results this quarter. Eli Lilly had mentioned earlier this year that unfavorable currency movement will affect 2015 revenues by 6% – 7% and earnings by about 7 cents per share. Share buybacks and cost control should help the company achieve its guidance.
What Our Model Indicates
Our proven model shows that Eli Lilly is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Earnings Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.32%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.
The combination of Eli Lilly’s Zacks Rank #3 and +1.32% ESP makes us very confident in looking for a positive earnings beat on Apr 23.
Stocks That Warrant a Look
Here are some health care stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
ImmunoGen, Inc. IMGN has an Earnings ESP of +32% and carries a Zacks Rank #3. It is scheduled to report results on Apr 24.
The Earnings ESP for Biogen BIIB is +0.51% and it carries a Zacks Rank #1 (Strong Buy). The company is also scheduled to release results on Apr 24.
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