Why Lilly (LLY) Is Ready to Beat Earnings Estimates Again

If you’re looking for a stock that has a solid history of beating earnings estimates and is well-positioned to continue that trend in its next quarterly report, you should consider Eli Lilly (LLY). This company, which operates in the Zacks Large Cap Pharmaceuticals industry, is showing the potential for another earnings beat.

The drugmaker has a well-established reputation for beating earnings estimates, especially looking at the past two reports. The company boasts an average earnings surprise of 1.39% over the past two quarters.

For the last quarter, Lilly was expected to post earnings of $2.53 per share but instead posted earnings of $2.58, representing a surprise of 1.98%. For the previous quarter, the consensus estimate was $2.47 per share, when in fact earnings were $2.49 per share, representing a surprise of 0.81%.

Price and EPS are surprising

In Lilly’s case, estimates are higher, thanks in part to this earnings surprise history. And when you look at the stock’s positive Zacks Earnings ESP (Expected Surprise Prediction), it’s a great indicator of future earnings beats, especially when paired with its solid Zacks Rank.

Our research shows that stocks with the combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better deliver a positive surprise almost 70% of the time. In other words, if you have 10 stocks with this combination, the number of stocks that beat consensus estimates could be as many as seven.

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter; the Most Accurate Estimate is a revision of the Zacks Consensus definition that is related to revision. The idea is that the analysts revising their estimates just before an earnings release have the latest information, which could potentially be more accurate than what they and other contributors to the consensus had previously predicted.

Lilly currently has an Earnings ESP of +6.58%, suggesting that analysts have recently become bullish on the company’s earnings prospects. This positive Earnings ESP, combined with the stock’s Zacks Rank #3 (Hold), indicates that another beat is likely just around the corner. We expect the company’s next earnings report to be released on August 8, 2024.

In the case of the Earnings ESP indicator, it is important to remember that a negative value reduces its predictive power; however, it is important to remember that a negative Earnings ESP does not indicate a divergence in earnings.

Many companies end up beating consensus EPS estimates, although that’s not the only reason their stocks appreciate. In addition, some stocks can remain stable even if they end up missing consensus estimates.

For this reason, it is very important to check a company’s Earnings ESP before its quarterly release to increase your chances of success. Make sure you use our Earnings ESP Filter to discover the best stocks to buy or sell before they are released.

Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click to get this free report

Eli Lilly and Company (LLY): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research