Will Eli Lilly (LLY) Stock Be Hurt By This Downgrade?

NEW YORK (TheStreet) -- Shares of Eli Lilly & Co.  (LLY) were downgraded to "neutral" from "buy" at MKM Partners this morning.

The shares are down -0.50% to $59.73 in pre-market trade.

MKM said the shares are "now trading just 1.0% below our $61 fair value estimate."

Additionally, the firm noted, "after the April 21 FDA approval of Cyramza (ramucirumab) for gastric cancer, we see limited near term catalysts for Lilly."

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The firm  stock were down today by $0.83 (1.36%) as of the close of trading. By the end of trading, 6.27 million shares of LILLY (ELI) & CO exchanged hands as compared to its average daily volume of 5.39 million shares. The stock ranged in price between $59.97 to $61.15 after opening the day at $60.97 as compared to the previous trading day's close of $60.86. Overall, LILLY (ELI) & CO lagged the S&P 500 which was up 0.41%. Important items of note for LILLY (ELI) & CO and possible rationale for parts of today's stock move go as follows:

TheStreet Ratings team rates LILLY (ELI) & CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate LILLY (ELI) & CO (LLY) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • LLY's debt-to-equity ratio is very low at 0.30 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.06, which illustrates the ability to avoid short-term cash problems.
  • Net operating cash flow has slightly increased to $1,726.80 million or 7.79% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -16.34%.
  • The gross profit margin for LILLY (ELI) & CO is currently very high, coming in at 82.18%. Regardless of LLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 12.52% trails the industry average.
  • LLY, with its decline in revenue, slightly underperformed the industry average of 0.7%. Since the same quarter one year prior, revenues slightly dropped by 2.5%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: LLY Ratings Report
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