What’s Happening With LLY Stock?

Eli Lilly’s (NYSE: LLY) first-quarter performance was mixed, with revenue meeting expectations but earnings falling short. The company reported adjusted earnings of $3.34 per share versus the projected $3.46, while revenue reached $12.7 billion, aligning with consensus estimates. Although Eli Lilly experienced lower price realization, the strong volume growth for its key drugs contributed positively to top-line performance.

However, following a cancer deal with Scorpion Therapeutics in Q1, Eli Lilly lowered its full-year earnings outlook. This news concerned investors, causing the stock to decline after the results announcement. Now, if you are looking for an upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

How Did LLY Fare In Q1?

Eli Lilly’s revenue reached $12.7 billion in Q1, representing solid 45% year-over-year growth, driven by strong demand for its obesity drug Zepbound, which generated $2.3 billion in sales (a 4.5x year-over-year increase). Other key performers included Mounjaro, with sales up 113% year-over-year to $3.8 billion, and Verzenio, which saw a 10% increase to $1.2 billion. Notably, both Zepbound and Mounjaro sales exceeded consensus estimates of $2.2 billion and $3.7 billion, respectively.

The company also achieved a 100 basis point improvement in gross margin, reaching 83.5% in Q1. However, increased income taxes and losses from investments in equity securities partially offset the benefits of higher revenues and margin expansion. As a result, earnings grew only 29% to $3.34 per share, compared to $2.58 in the prior-year quarter.

Looking forward, Eli Lilly maintains its revenue guidance of $58-61 billion and gross margin projection of 41.5-43.5%, but has lowered its adjusted earnings forecast to $20.78-$22.28 per share, down from the previous range of $22.50-$24.00.

What Does It Mean For LLY Stock?

LLY has delivered impressive returns of 15% year-to-date, outperforming the S&P 500’s 5% decline during the same period. This investor optimism stems from massive demand for the company’s obesity treatments and positive outcomes from late-stage clinical trials for its daily obesity pill. In fact, the stock has consistently outperformed the broader market for four consecutive years, generating returns of 66% in 2021, 34% in 2022, 61% in 2023, and 33% in 2024.

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Given the current uncertain macroeconomic environment surrounding tariffs and trade wars, could LLY continue to outperform the market? From a valuation perspective, we believe LLY stock has significant growth potential.

At its current level of $855, LLY trades at 62 times trailing adjusted earnings of $13.76 per share, below the stock’s two-year average P/E ratio of 76x. This higher valuation multiple appears justified given the strong sales growth and robust outlook for the company’s obesity drugs in the coming years. Notably, the $992 average analyst price target reflects over 15% upside potential.

We believe investors could use the current dip—resulting from the earnings miss and downward revision to guidance—as an opportunity to acquire LLY stock for robust long-term gains. The company continues to have solid growth potential in the obesity treatment market, and these dips should be viewed as opportunities to enter the stock.

While LLY stock looks like it can see higher levels, it is helpful to see how Eli Lilly peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.