Eli Lilly is Tuesday's IBD Stock Of The Day. Shares are rounding the corner to a breakout after weight-loss drug Zepbound obliterated Wall Street's sales expectations.
In the March quarter, Zepbound brought in $517.4 million in sales, beating forecasts for $373 million, according to FactSet. This pushed Lilly to raise its sales outlook for the year by $2 billion, despite short revenue from diabetes treatments Mounjaro and Trulicity.
Analysts noted Eli Lilly and its biggest rival, Novo Nordisk, are struggling to meet demand for their diabetes and weight-loss drugs. Lilly plans to significantly expand production in the second half of the year, says David Song, portfolio manager for Tema ETFs' Obesity and Cardiometabolic exchange traded fund, which holds Eli Lilly stock.
"In summary, this was a solid report with positives (guidance raise and Zepbound) and a few negatives (light on Trulicity and Mounjaro)," Song said in an email to Investor's Business Daily. "My sense is that the initial positive stock reaction on the print is due to the guidance and Zepbound trends."
On today's stock market, shares jumped 6% to close at 781.10, marking a gap above the 50-day moving average. Eli Lilly stock has a flat base with a buy point at 800.78, according to MarketSurge. Investors could also use a March 28 high of 793.67 as an early entry.
Novo Nordisk, which sells diabetes and weight-loss drugs Ozempic and Wegovy, rose 1.4%, set to move off its 50-day line. That could serve as an early entry for Novo stock, which has a 138.28 buy point from a flat base.
Eli Lilly Stock: Sales Miss Forecasts
Across all products, Lilly's sales climbed 26% to $8.77 billion. But sales came up short. Analysts called for $8.94 billion in sales. Adjusted earnings, on the other hand, handily beat expectations at $2.58 per share, up 59%. Analysts projected a lower $2.47.
But Mounjaro and Trulicity sales missed forecasts. Despite zooming 218% higher, Mounjaro brought in $1.81 billion in sales and missed expectations for $2.15 billion. Trulicity sales tumbled 26% to $1.46 billion, vs. the Street's $1.63 billion estimate.
Evercore ISI analyst Umer Raffat said investors expected Lilly's GLP-1 franchise to be "soft" heading into the first-quarter report. These drugs interact with the GLP-1 hormone to improve feelings of satiety and markers of blood sugar, as well as slow how fast the stomach empties itself. They include Trulicity, Mounjaro and Zepbound.
Raffat blamed the softness on a lower-than-expected gross-to-net for Mounjaro and Zepbound.
"However, Lilly raised full-year guidance and demand remains robust," he said in a report. In addition, he said Lilly is pointing to "significant production increases in the second half of the year."
He kept his in-line (neutral) rating on Eli Lilly stock.
Sales of other key products, cancer drug Verzenio and diabetes med Jardiance, also lagged expectations. Verzenio sales surged 40% to $1.05 billion, but came in below forecasts for $1.13 billion. Jardiance brought in $686.5 million in sales, up 19%, but undercut the $720 million consensus call.
Bolstered Weight-Loss Drug Production
Notably, Eli Lilly raised its full-year sales outlook by $2 billion and now expects $42.4 billion to $43.6 billion in sales. That topped the Street's call for $41.44 billion.
The company also boosted its earnings guidance for the year, and now projects $13.50 to $14 per share, minus some items. Analysts expected just Lilly to earn just $12.49 a share.
Leerink Partners analyst David Risinger says the guidance boost comes on the back of better visibility into production expansion this year. He also noted Zepbound is winning insurance uptake. As of April 1, two-thirds of commercially covered patients have access to the weight-loss drug, up from a third of the group on Feb. 1.
Risinger reiterated his outperform rating on Eli Lilly stock.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
