Eli Lilly Earnings Cheat Sheet: Margins Suffer as Costs Rise, Profit Falls

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

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Eli Lilly and Company Earnings Cheat Sheet for the Second Quarter

Results: Net income for the drug manufacturer fell to $1.2 billion ($1.07 per share) vs. $1.35 billion ($1.22 per share) a year earlier. This is a decline of 11.2% from the year earlier quarter.

Revenue: Rose 8.8% to $6.25 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: LLY fell short of the mean analyst estimate of $1.19 per share. It beat the average revenue estimate of $5.99 billion.

Quoting Management: “In the second quarter, Lilly once again achieved solid volume-driven revenue growth, despite the negative impact of generic versions of gemcitabine in the United States. Our financial results reflect the solid performance of many of our marketed products, as well as important investments we are making to expand our commercial opportunities and deliver the next wave of potential new medicines to patients,” said John C. Lechleiter, Ph.D., Lilly’s chairman, president and chief executive officer. “Key Lilly products continue to perform well, including Cymbalta, Cialis and our insulins. Exchange rates have also contributed to favorable sales comparisons. At the same time, we are investing for the company’s future by supporting the launches of new medicines and new indications, as well as funding our R&D pipeline, which now boasts 70 potential new medicines in clinical development.”

Key Stats:

Gross margin shrank 1.8 percentage points to 80.4%. The contraction appeared to be driven by increased costs, which rose 19.9% from the year earlier quarter while revenue rose 8.8%.

Revenue has risen the past four quarters. Revenue increased 6.4% to $5.84 billion in the first quarter. The figure rose 4.3% in the fourth quarter of the last fiscal year from the year earlier and climbed 1.7% in the third quarter of the last fiscal year from the year-ago quarter.

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

The company fell short of forecasts after beating estimates in the previous two quarters. In the first quarter, it topped the mark by 7 cents, and in the fourth quarter of the last fiscal year, it was ahead by one cent.

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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(Source: Xignite Financials)