Eli Lilly Posts a Huge Earnings Miss. Should Investors Be Worried?

Core Viewpoint - Eli Lilly's stock has experienced a significant decline following its latest earnings report, which failed to meet high analyst expectations, leading to concerns about its valuation and future performance [1][2]. Financial Performance - Eli Lilly's revenue increased by 20% to $11.4 billion for Q3, but this fell short of analyst expectations of $12.1 billion [2]. - Adjusted earnings per share (EPS) were reported at $1.18, significantly below the anticipated $1.47 EPS [2]. Inventory and Supply Issues - The company faced challenges with inventory levels, as wholesalers did not reorder supplies while fulfilling back orders for Mounjaro and Zepbound, potentially leading to shortages in the next quarter [3]. - Strong demand for products exists, but supply chain issues have been a persistent problem for Eli Lilly [7]. Guidance Adjustment - Eli Lilly revised its guidance for the year, projecting adjusted EPS to be between $13.02 and $13.52, down from a previous forecast of $16.10 to $16.60, which disappointed investors [4]. Stock Performance - Prior to the earnings report, Eli Lilly's stock was trading around $900, but it dropped to approximately $800, reflecting a decline of over 10% in just a few days [5]. - The stock was previously trading at more than 100 times its trailing profits, indicating elevated expectations [6]. Long-term Outlook - Despite recent bearish sentiment, there are reasons for optimism, as inventory and supply issues are expected to resolve over time, particularly with increased capacity [7]. - The long-term potential of Mounjaro and Zepbound could lead to significant revenue generation, allowing earnings to align with the stock's high valuation [9]. - Eli Lilly is viewed as a candidate to become the first healthcare stock to reach a $1 trillion valuation, suggesting that buying during periods of weakness could yield good returns for long-term investors [10].