On August 8, 2024, Eli Lilly & Co. (LLY) announced its second-quarter earnings, delivering results that significantly exceeded expectations and propelled its stock to new heights. The announcement resulted in a dramatic 9.5% surge in Lilly’s share price on the day, followed by an additional 5.5% increase the next day. By the end of the week, Eli Lilly’s stock had risen to $891.68, reflecting a robust 10.8% weekly gain. This surge follows a remarkable year-to-date performance, with the stock up 53% so far in 2024, outpacing the relatively flat performance of the S&P 500.
Analysts’ Optimistic Projections
The strong earnings report has sparked a flurry of positive revisions from analysts, who are bullish about Eli Lilly’s future prospects. Here’s a closer look at the updated analyst targets and commentary:
- Morgan Stanley: The investment firm has upgraded its 12-month target price for Lilly from $1,083 to $1,106. Analysts at Morgan Stanley have given the stock an “Outperform” rating, highlighting Lilly’s “strongest growth profile” among its coverage universe and identifying it as a “top pick” for investors.
- Wells Fargo: Maintaining an “Outperform” rating, Wells Fargo has raised its target price from $875 to $1,000. Analyst Mohit Bonsal emphasized the significant revenue potential of Lilly’s obesity drug Zepbound and its diabetes treatment Mounjaro, suggesting that these drugs represent a “global opportunity worth $100 billion.”
- BMO Capital: BMO Capital has increased its target price from $1,001 to $1,101, noting Lilly’s successive “healthy” increases in revenue and earnings guidance as a key factor in their optimism.
- JPMorgan: JPMorgan has revised its target price from $1,000 to $1,050, projecting “significant upsides” to its 2025 earnings estimates.
- Bank of America: Bank of America has raised its target from $1,000 to $1,150, citing Lilly’s second-quarter earnings, which were “substantially ahead of guidance.” The revised revenue guidance for 2024, which increased by $3 billion, also exceeded earlier expectations by $2 billion.
Key Drivers of Growth
Several factors have contributed to Lilly’s impressive earnings and stock performance:
- Mounjaro: Lilly’s diabetes treatment Mounjaro (tirzepatide) was a major revenue driver, generating $3.1 billion in the quarter. This accounted for 27% of the company’s total revenue of $11.3 billion, underscoring the drug’s significant impact on Lilly’s financial performance.
- Zepbound: Lilly’s weight-loss drug Zepbound achieved $1.2 billion in revenue, a substantial increase from virtually nothing a year ago. This rapid growth reflects the drug’s successful market penetration and increasing demand.
- Future Blockbusters: Analysts are also optimistic about other promising drug candidates in Lilly’s pipeline. The breast-cancer treatment Verzenio and Kisunia, a drug aimed at slowing memory loss in Alzheimer’s patients, are expected to generate substantial revenues in the future.
Stock Performance and Market Reactions
Despite the impressive gains, Lilly’s stock has experienced some volatility. After peaking at $950.46 on July 15, 2024, the stock fell by 18.8% by August 7, reflecting broader market declines from summer highs. However, Lilly’s shares rebounded strongly, with a 15.5% increase over the last two trading days of the week, showcasing resilience and investor confidence.
Potential Stock Split
With a market capitalization of $802.9 billion—ranking it among the largest stocks, behind only Apple, Microsoft, and Amazon in the Dow Jones Industrial Average—there is speculation about a potential stock split. Historically, Eli Lilly has split its stock five times, with the most recent split occurring in October 1997. A stock split could make the shares more attractive to a broader range of investors and potentially adjust the stock price to a level that aligns better with the Dow’s price-weighted index. Currently, the highest-priced stock in the Dow is UnitedHealth Group, trading at $558.76.
Company History and Leadership
Founded in 1876 by Civil War veteran Eli Lilly in Indianapolis, the company has evolved into a major pharmaceutical powerhouse. Eli Lilly operates in 125 countries and employs around 43,000 people. Over its long history, Lilly has developed a range of influential drugs, including insulin, Prozac, and Zyprexa, and played a crucial role during World War II by producing penicillin for the armed forces.
David Ricks, who has served as CEO since 2017, has been instrumental in the company’s recent success. Ricks, described by Oracle CEO Shantanu Narayan as “equal parts visionary and pragmatist,” has guided Lilly through a period of substantial growth and market success.
Summary
Eli Lilly’s impressive second-quarter results have solidified its position as a leading pharmaceutical company, with analysts projecting continued growth and profitability. The company’s strategic focus on high-potential drug treatments and its strong financial performance position it well for future success. Despite occasional market fluctuations, Lilly’s robust earnings and optimistic future outlook reflect its strength and resilience in the pharmaceutical sector.