Eli Lilly Shares Seen Rising 18% as Profits Surge

(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Eli Lilly and Co.'s (LLY) stock may be set to rise by over 18% if analysts price targets prove to be correct. Analysts have been upping their estimates of the pharmaceutical company in recent weeks, at a much faster pace than peers like Merck & Co., Inc. (MRK), Pfizer Inc. (PFE) and Bristol-Myers Squibb Co. (BMY). The rising forecast comes after the company easily beat analysts' estimates when it reported first-quarter results on April 24. (For related reading, see also: Eli Lilly & Co. Up on Revenue Beat.) 

Lilly's stock has underperformed the S&P 500 and Healthcare Select Sector SPDR ETF (XLV) over the past year, falling by over 4%. The S&P 500 has risen by over 9%, while the healthcare ETF has climbed by nearly 6%. 

LLY data by YCharts

Bullish Price Target

Analysts currently see shares of Lilly rising to an average price target of about $92, about 18% higher than the stock's current price of around of $78. Of the 22 analysts covering the stock, 64% rate the share a "buy" or "outperform," while 32% rate the shares a "hold." 

LLY Price Target data by YCharts

Better Results

Lilly easily topped analysts' forecasts when it reported results on April 24, beating both the top and bottom line. Lilly's better than expected revenue and earnings topped estimates by nearly 3.4% and 18.25%, respectively.

Upping Forecast

As results of the big earnings beat surfaced, analysts have upped their revenue estimates by over 2%, and earnings estimates by more than 3.5%. Analysts are now forecasting second-quarter revenue to rise by 3.5% from last year to $6.02 billion, and earnings to rise by nearly 16.3% to $1.29 per share. Additionally, they have upped the full-year earnings estimates by almost 6%, and revenue estimates by nearly 2.25%, with earnings now seen growing by 20.3% to $5.15 per share, and revenue climbing by 4.4% to 23.88 billion. (For more, see also: Eli Lilly Boosts Dividend 2%, Despite Recent Woes.)

LLY Revenue Estimates for Current Quarter data by YCharts

Better Than Peers

By comparison, Merck's estimates have not been raised at the same pace for the quarter or the full-year, with revenue forecasts for the quarter rising by 1.8%, while earnings' estimates remain flat. Pfizer's estimates have all stayed unchanged, while only Bristol Myers earnings' estimates have risen for both the year and the quarter by 3.5%. 

MRK Revenue Estimates for Current Quarter data by YCharts

Should the optimism around the outlook for Lilly's earnings and revenue continue to improve, it could result in shares of the stock reversing, and perhaps become a leader among a struggling group of companies. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the founder of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of two to three years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.