Eli Lilly and Company Earnings Cheat Sheet: Higher Expenses Shrinks Margins, Profit Declines

Rising costs hurt S&P 500 (NYSE:SPY) component Eli Lilly and Company (NYSE:LLY) in the third quarter as profit dropped from a year earlier. Eli Lilly develops and manufactures pharmaceutical products as well as animal health products.

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Eli Lilly and Company Earnings Cheat Sheet for the Third Quarter

Results: Net income for the drug manufacturer fell to $1.24 billion ($1.11 per share) vs. $1.3 billion ($1.18 per share) a year earlier. This is a decline of 5.1% from the year earlier quarter.

Revenue: Rose 8.7% to $6.15 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: LLY reported adjusted net income of $1.13 per share. By that measure, the company fell in line with the mean estimate of $1.13 per share. Analysts were expecting revenue of $6.03 billion.

Quoting Management: “In the third quarter Lilly continued to drive revenue growth for many key brands, including Cymbalta, Humalog, Forteo and Strattera, with strong growth also seen in animal health, Japan and China. This growth offset the continued erosion of Gemzar sales due to generic competition,” said John C. Lechleiter, Ph.D., Lilly’s chairman, president and chief executive officer. “As we face the loss of patent exclusivity for Zyprexa in most major markets, we are well-prepared as a company to meet the challenges before us. We remain committed to our innovation-based strategy and are focused on delivering the next wave of new medicines to patients in the coming years.”

Key Stats:

Gross margin shrank 4.3 percentage points to 78.2%. The contraction appeared to be driven by increased costs, which rose 35.5% from the year earlier quarter while revenue rose 8.7%.

Revenue has risen the past four quarters. Revenue increased 8.8% to $6.25 billion in the second quarter. The figure rose 6.4% in the first quarter from the year earlier and climbed 4.3% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last three quarters. In the second quarter, net income fell 11.2% from the year earlier, while the figure fell 15.4% in the first quarter.

The company fell in line with estimates last quarter after missing forecasts in the previous quarter with net income of $1.18 versus a mean estimate of net income of $1.19 per share.

Looking Forward: Expectations for the fourth quarter have not changed from 78 cents. The average estimate for the fiscal year is $4.33 per share, a rise from $4.29 ninety days ago.

Competitors to Watch: Pfizer Inc. (NYSE:PFE), Bristol Myers Squibb Co. (NYSE:BMY), Merck & Co., Inc. (NYSE:MRK), Johnson & Johnson (NYSE:JNJ), Amylin Pharmaceuticals, Inc. (NASDAQ:AMLN), GlaxoSmithKline plc (NYSE:GSK), Alkermes, Inc. (NASDAQ:ALKS), Roche Holding Ltd. (RHHBY), Novartis AG (NYSE:NVS), and Abbott Laboratories (NYSE:ABT).

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(Source: Xignite Financials)