Eli Lilly and Company Earnings: Margins Suffer as Revenue Drops, Net Income Falls

S&P 500 (NYSE:SPY) component Eli Lilly and Company (NYSE:LLY) reported its results for the first 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 First Quarter

Results: Net income for Eli Lilly and Company fell to $1.01 billion (91 cents per share) vs. $1.06 billion (95 cents per share) a year earlier. This is a decline of 4.2% from the year-earlier quarter.

Revenue: Fell 4.1% to $5.6 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Eli Lilly and Company reported adjusted net income of 92 cents per share. By that measure, the company beat the mean estimate of 78 cents per share. It beat the average revenue estimate of $5.35 billion.

Quoting Management: “Lilly’s financial results in the first quarter represent a solid start to the year and support our decision to increase our 2012 EPS guidance. Notwithstanding the negative effect of the expiration of the Zyprexa patent in the U.S. and many international markets, Lilly demonstrated strong underlying growth in other products and key regions; specifically, Cymbalta, Forteo, Effient, diabetes care and our animal health portfolio, as well as our fast-growing affiliate in China,” said John C. Lechleiter, Ph.D., Lilly’s chairman, president and chief executive officer. “We continue to invest appropriately in our pipeline, with 12 potential new medicines now in Phase III clinical trials. We strongly believe that our innovation-based strategy will enable Lilly to return to steady growth following a period of multiple patent expirations.”

Key Stats:

Gross margins went down 1.2 percentage points to 78.6%. The change appaered to be driven by falling revenue, as the figure dropped 4.1% from the year-earlier quarter, while costs rose 1.5%.

The company has now beaten estimates the last two quarters. In the fourth quarter of the last fiscal year, it topped expectations with net income of 87 cents versus a mean estimate of net income of 81 cents per share.

Net income has dropped 12.5% year-over-year on average across the last five quarters. Performance was hurt by a 26.6% decline in the fourth quarter of the last fiscal year from the year-earlier quarter.

Revenue has fallen in the past two quarters. In the fourth quarter of the last fiscal year, revenue declined 2.3% to $6.05 billion from the year-earlier quarter.

Looking Forward: For the next quarter, analysts are growing pessimistic about the company’s expected results. The average estimate for the second quarter is 72 cents per share, dropping from 73 cents a month ago. The average estimate for the fiscal year has remained at $3.18 per share.

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

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