"We see Lilly as a compelling pipeline-driven recovery story after the earnings squeeze it endured across the 'YZ' years (loss of cYmbalta/Zyprexa)," analysts said.
As the company is in the midst of launching new products in core therapy areas such as diabetes and oncology, revenue growth is expected to grow, analysts added.
However, some risks include trial failure of key drug, deterioriating price outlook, and unexpected patent loss.
In Wednesday's early morning trading session shares are declining 0.7% to $84.20.
Separately, TheStreet Ratings team rates LILLY (ELI) & CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate LILLY (ELI) & CO (LLY) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins, solid stock price performance and largely solid financial position with reasonable debt levels by most measures. We feel its 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:
- The gross profit margin for LILLY (ELI) & CO is currently very high, coming in at 83.39%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, LLY's net profit margin of 11.40% significantly trails the industry average.
- Compared to its closing price of one year ago, LLY's share price has jumped by 45.60%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.95 is somewhat weak and could be cause for future problems.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 2.1%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- LILLY (ELI) & CO's earnings per share declined by 26.5% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, LILLY (ELI) & CO reported lower earnings of $2.23 versus $4.31 in the prior year. This year, the market expects an improvement in earnings ($3.15 versus $2.23).
- You can view the full analysis from the report here: LLY Ratings Report