Eli Lilly (LLY, Financial) shares saw a significant downturn, falling 6.39%, as the company failed to meet expectations in its third-quarter earnings announcement. The drop in share price reflects investor concerns over lower-than-expected revenue and earnings per share, along with a revised annual EPS guidance.
For the third quarter, Eli Lilly reported revenue of $11.4 billion, reflecting a 20% increase from the previous year but falling short of the analyst prediction of $12.1 billion. The company's net income was $970.3 million, translating to $1.07 per share on a GAAP basis. The non-GAAP earnings per share came in at $1.18, missing the consensus estimate of $1.47.
Investors were particularly alarmed by the reduction in full-year EPS guidance. The company now projects its non-GAAP EPS to be in the range of $13.02 to $13.52, down from its earlier forecast of $16.10 to $16.60. This revision is significantly attributed to the acquisition of Morphic Holdings, which impacted research and development costs by $3.09 billion, or $3.33 per share.
Strong sales were reported for Mounjaro, a type 2 diabetes medication, and Zepbound, a weight-loss drug, with Mounjaro's sales doubling year-over-year to $3.1 billion and Zepbound achieving $1.26 billion since its approval in November 2023. However, these figures were below analyst expectations, primarily due to a reduction in the U.S. wholesaler inventory channel.
Analyzing Eli Lilly's (LLY, Financial) market position, the company's current stock price stands at $845.87 with a market capitalization of $761.6 billion. The price-to-earnings (P/E) ratio is notably high at 104.17, indicating that the stock may be overvalued. Additionally, the GF Value suggests that Eli Lilly is "Significantly Overvalued," with a GF Value of $545.23. The company's debt levels remain acceptable despite recent issuances, and its Altman Z-score of 9.67 reflects strong financial health.
From a valuation perspective, Eli Lilly's price-to-book ratio is close to a 10-year high at 56.17, and the price-to-sales ratio is also near a peak at 19.63. The company faces challenges including a low dividend yield and recent insider selling, with four transactions accounting for the sale of 52,582 shares over the past three months. Nevertheless, the company's operations are supported by an expanding operating margin and a strong Altman Z-score, presenting a mix of opportunities and risks for potential investors.
