Eli Lilly and Company Earnings: Margins Shrink on Rising Costs, Net Income Falls

S&P 500 (NYSE:SPY) component Eli Lilly and Company (NYSE:LLY) reported its results for the fourth quarter. 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 Fourth Quarter

Results: Net income for the drug manufacturer fell to $858.2 million (77 cents per share) vs. $1.17 billion ($1.05 per share) a year earlier. This is a decline of 26.6% from the year earlier quarter.

Revenue: Fell 2.3% to $6.05 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: LLY reported adjusted net income of 87 cents per share. By that measure, the company beat the mean estimate of 80 cents per share. It beat the average revenue estimate of $5.9 billion.

Quoting Management: “Lilly’s fourth quarter results not only reflect the impact of recent patent expirations, but also highlight the growth opportunities that will enable us to remain a strong and successful company in the years ahead,” said John C. Lechleiter Ph.D., Lilly’s chairman, president and chief executive officer. “Although we anticipated the sales erosion in the fourth quarter resulting from the loss of U.S. patent exclusivity for Zyprexa in late October, I am encouraged by the strong performance of many other areas of our business. Products such as Cymbalta, Humalog, Humulin, Forteo, Alimta, Cialis and our animal health portfolio all demonstrated solid growth in the quarter, as did key regions including Japan and the emerging markets. With continued growth in these areas, along with a late-stage clinical pipeline that now features a dozen potential new medicines in Phase III, Lilly is well-positioned to deliver on our innovation-based strategy and create long-term value for all of our stakeholders.”

Key Stats:

The company has now seen net income fall in each of the last four quarters. In the third quarter, net income fell 5.1% while the figure fell 11.2% in the second quarter and 15.4% in the first quarter.

A year-over-year revenue decrease last quarter snaps a streak of four consecutive quarters of revenue increases. The best quarter in that span was the second quarter, which saw revenue rise 8.8%.

Gross margin shrank 1.9 percentage points to 78.1%. The contraction appeared to be driven by increased costs, which rose 7.3% from the year earlier quarter while revenue fell 2.3%.

The company beat estimates last quarter after being in line with expectations in the third quarter with net income of $1.13 per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the first quarter of the next fiscal year has moved down from 83 cents a share to 79 cents over the last thirty days. For the fiscal year, the average estimate has moved up from $4.34 a share to $4.35 over the last seven days.

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), Novartis AG (NYSE:NVS), and Abbott Laboratories (NYSE:ABT).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com