Eli Lilly stock climbs on gross margin beat, raised 2024 revenue outlook

Eli Lilly & Co. (NYSE:LLY) saw its shares jump over 7% at the open on Tuesday after the pharmaceutical giant reported better-than-expected earnings and gross margin for the fiscal Q1 2024.

Specifically, Eli Lilly posted earnings per share (EPS) of $2.58, beating the analyst expectations of $2.48. However, the company’s revenue for the quarter was $8.77 billion, falling short of the consensus estimate of $8.94 billion.

Importantly, the company’s gross margin improved significantly, reaching 80.9% compared to 76.6% in the same period last year and surpassing the consensus projection of 79.9%.

Looking forward, Eli Lilly expects its full-year 2024 EPS outlook to be between $13.50 and $14.00, well above the estimated $12.50.

The company also hiked its revenue forecast for the year to between $42.4 billion and $43.6 billion, compared to a consensus of $41.44 billion.

This upward revision, an increase of roughly $2 billion from the previous forecast, is primarily attributed to the strong performance of its drugs Mounjaro and Zepbound, as well as expanded production capabilities for the rest of the year.

“Lilly’s first quarter performance reflects solid year-over-year revenue growth with strong sales of Mounjaro and Zepbound,” said David A. Ricks, Lilly’s chair and CEO.

“Our progress in addressing some of the world’s most significant health care challenges has resulted in increased demand for our medicines.”

Following the earnings release, analysts at Citi said Eli Lilly’s “strong Q1 and a $2bn revenue plus 200bps margin raise for FY24, on tirzepatide revenue/mix dynamics, will likely keep the shares bouyant.” The bank maintained a Buy rating and $895 price target on the stock.

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Meanwhile, analysts at Goldman Sachs said the company reported “somewhat of a mixed quarter, with 1Q24 revenues of $8.8bn coming in below GS/Consensus (Visible Alpha) estimates of $9.2bn/$8.9bn, though on the bottom-line, EPS of $2.58 was ahead of GS/Consensus estimates of $2.40/$2.39, respectively.”

Analysts at BMO Capital told investors that the higher guidance overshadows the “high-quality miss on [the] top line.”

The revenue “miss (-2% vs. consensus) reflects a lack of capacity, rather than a problem with Lilly product demand. 1Q24 earnings continued to demonstrate the need for continued capacity expansion with Trulicity and Mounjaro notably missing (-14% and -12% respectively),” they wrote.