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Eli Lilly shares slip despite earnings beat

 

Wednesday, February 07, 2024

Today’s headlines

What’s happening: Shares of Eli Lilly and Company edged lower on Tuesday, after the company released results for its fourth quarter.

What happened: The drugmaker reported better-than-expected earnings for its fourth quarter on Tuesday.

Eli Lilly also issued a robust forecast, driven by higher sales of its diabetes and weight-loss treatments.

How were the results: The Indianapolis, Indiana-based company reported double-digit growth in sales for the three months ended in December.

  • Revenues grew by 28% year-over-year to $9.35 billion, beating the consensus estimates of $8.93 billion.
  • Adjusted earnings climbed 19% year-over-year to $2.49 per share, topping Wall Street expectations of $2.19 per share.

Why it matters: News of strong demand for Eli Lilly’s diabetes treatment Mounjaro and now Zepbound had recently triggered a rally in the company’s stock, sending its market valuation to more than $600 billion.

The company reported a revenue beat for the latest quarter on higher realised prices and volumes. Realised prices were boosted by Mounjaro in the US, although this was somewhat offset by a decline in realised prices for Humalog and Trulicity.

New Products revenues grew by $2.19 billion to $2.49 billion in the fourth quarter, driven by Mounjaro and Zepbound, while Growth Products revenues rose 9% to $5.27 billion, driven by Verzenio and Jardiance.

Sales of Mounjaro (Type 2 diabetes injection) jumped to $2.21 billion, from $279.2 million in the year-ago quarter. Verzenio (breast cancer drug) sales jumped 42% to $1.15 billion, while sales of diabetes drug Jardiance rose 30% to $791.1 million during the quarter.

Trulicity’s sales fell 14% to $1.67 billion, while sales for Taltz climbed 11% to $709 million during the quarter. Zepbound (obesity drug) sales hit $175.8 million in the first few weeks of its launch, after the FDA gave an approval in November 2023.

Management guided to sales between $40.4 billion and $41.6 billion for fiscal 2024, higher than market estimates of $39.14 billion. They projected adjusted earnings of $12.20 to $12.70 per share, compared to market views of $12.38 per share.

How shares responded: Eli Lilly’s shares fell 0.2% to close at $705.03 on Tuesday, following the release of quarterly results. The stock has jumped 55% over the past six months.

What to watch: Investors will watch Eli Lilly’s sales of Mounjaro and Zepbound, as demand is expected to outpace supply in 2024 despite the company looking to expand its manufacturing capacity.

The markets today

The Canadian dollar will be in focus today ahead of the country’s balance of trade data

Context: The CAD/USD forex pair strengthened on Tuesday, as investors assessed recent economic data.

Details: Data released on Tuesday showed the Ivey Purchasing Managers Index in Canada had increased to 56.5 in January, from 56.3 in the prior month. The figure also topped market estimates of 55. The latest reading signalled the sixth straight month of growth in Canada’s economic activity and was the strongest growth since April 2023.

The total value of building permits in Canada fell by 14% to $9.2 billion in December, following a decline of 5% in November. The figure also missed market expectations of a 1.8% increase.

While the Bank of Canada raised its key overnight rate 10 times in the last 17 months, to 5%, it has kept rates unchanged at its last four meetings. Canada’s central bank will announce its next policy decision in March. Canada’s inflation eased to 3.4% in December, from a high of 8.1% in June 2022.

Prices for crude oil, one of Canada’s major exports, moved higher on Tuesday, providing a boost to the Canadian dollar. WTI crude oil prices rose 53 cents to settle at $73.31 a barrel.

Weakness in the US dollar also lent support to the loonie. The US dollar index, which measures the greenback’s performance versus a basket of a major peers, fell more than 0.2% to 104.21 on Tuesday.

The CAD/USD forex pair added around 0.3% to reach 1.3495 on Tuesday. The S&P/TSX Composite Index gained 0.41% to close at 20,957.74, recovering from two sessions of losses.

What to watch: Investors await the release of economic data on balance of trade from Canada today. Canada had recorded a trade surplus of C$1.57 billion in November and is expected to report a surplus of C$1.1 billion in December.

Other Markets: European indices closed higher on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.90%, 0.76%, 0.65% and 0.63%, respectively.

The news shaping the markets

The US and Russia accused each other at a UNSC (United Nations Security Council) meeting on Ukraine called by Moscow. The news sent the safe-haven US dollar index slightly lower this morning.


The Philippines said its unemployment rate had declined to a new record low of 3.1% in December, from 4.3% in the year-ago month, which lent support to the PHP/USD forex pair.


South Korea’s current account surplus widened to $7.41 billion in December, from $3.89 billion in the previous month, which sent the KRW/USD pair higher in forex trading this morning.


Australia’s Ai Group Industry Index for the manufacturing sector rose by 1.5 points to a reading of -23.8 in January, lending support to the AUD/USD forex pair.


New Zealand’s unemployment rate rose to 4% in the three months to December, from 3.9% in the previous quarter. However, the latest reading was still below market estimates of 4.2% and sent the NZD/USD pair higher in forex trading this morning.

What else to watch today

South Africa’s foreign exchange reserves, Germany’s industrial production, UK’s Halifax house price index, France’s balance of trade, current account, foreign exchange reserves and payroll employment in the private sector, Spain’s industrial production and consumer confidence indicator, Italy’s retail sales, Singapore’s foreign exchange reserves, Brazil’s gross debt to GDP, retail sales, car production, new vehicle sales, balance of trade and government budget value, India’s money supply M3, Mexico’s consumer confidence, auto exports and car output, US MBA mortgage applications, balance of trade, crude oil inventories, gasoline inventories, distillate stocks, Logistics Manager’s Index, Manheim used vehicle value index and consumer credit, Russia’s unemployment rate, business confidence, corporate profits, real wages, retail sales and GDP, as well as China’s foreign exchange reserves.


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