Eli Lilly (LLY) to Report Q3 Earnings: What's in Store?

Eli Lilly and CompanyLLY will report third-quarter 2017 results on Oct 24, before the market opens. Last quarter, the company delivered a positive earnings surprise of 6.73%.

Lilly's shares have risen 17% this year so far while the industry recorded an increase of 18.2%.

Lilly's performance has been mixed with earnings missing expectations in two of the last four quarters while beating the same in the other two, bringing the average negative surprise to 0.89%.

Let's see how things are shaping up for this quarter.

Factors to Consider

New products like Trulicity, Taltz and Jardiance have supported the top line in the past few quarters. We expect the trend to continue in the third quarter of 2017 as well. While Trulicity sales are expected to be driven by growth in the GLP-1 market and market share gains, Jardiance sales are likely to be driven by increased market share within the growing SGLT2 class. Newer products like Basaglar, Lartruvo and Taltz may continue to witness better sequential sales backed by strong launch uptake.

However, sales of Alimta, Cymbalta and Zyprexa are expected to decline due to the loss of exclusivity. Cymbalta has lost exclusivity in Europe and Canada, Zyprexa in Japan and Alimta in several countries outside the United States. Meanwhile, lower demand in the United States due to competitive pressure mainly from immuno-oncology agents is hurting Alimta sales in the country. The consensus estimate for Alimta for the third quarter is $508 million.

Another new drug Olumiant (baricitinib) has been launched in select European countries. In July, the drug was approved in Japan, which is likely to add to the top line in the third quarter. However, in the United States, the drug is under review. In August, Lilly and partner Incyte Corporation INCY announced that they will re-submit the NDA for baricitinib much faster than previously expected. The NDA is expected to be re-submitted in January next year.

Meanwhile, older products like Humulin, Trajenta and Forteo may continue to do well.

Animal Health segment sales, in the past two quarters, have been hurt by global competitive pressure. At the Q2 conference call, management had said that the global competitive pressure will continue to hurt revenues in the segment through the rest of the year, though to a lesser extent. The consensus estimate for Animal Health segment for the third quarter is $715 million.

Earnings Whispers

Our proven model does not conclusively show that Lilly is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Its Earnings ESP is -0.14%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Lilly's Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Eli Lilly and Company Price and EPS Surprise

Eli Lilly and Company Price and EPS Surprise | Eli Lilly and Company Quote

Stocks to Consider

Stocks in the pharmaceuticals sector that have both a positive ESP and a favorable Zacks Rank include

Bristol-Myers Squibb Company BMY , scheduled to release results on Oct 26, with an Earnings ESP of +2.35% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Pfizer, Inc. PFE with an Earnings ESP of +1.85% and a Zacks Rank #3. The company is scheduled to release results on Oct 31.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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