Eli Lilly and Co. (LLY) is set to report FQ4 2013 earnings before the market opens on Thursday, January 30th. Eli Lilly and Co. is an American global pharmaceutical company known for being the first pharma company to mass produce penicillin. Today Eli Lilly is the largest manufacturer of psychiatric medicine in the world. Early this month the European Commission approved Abraxane, a drug made by Celgene (CELG) that is combined with LLY’s Gemzar to create a treatment for metastatic pancreatic cancer. Although Eli Lilly has lost patent rights for two of its drugs this year, Cymbalta and Zyprexa, Cialis and other exclusive drugs should continue to drive revenue. Recently fellow pharmaceuticals Pfizer (PFE) and Amgen (AMGN) both reported stronger than expected earnings and analyst expectations are high for Eli Lilly as well.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for Eli Lilly to report 73c EPS and $5.485B revenue while the current Estimize.com consensus from Buy Side and Independent contributing analysts is 74c EPS and $5.521B revenue. This quarter the buy-side as represented by the Estimize.com community is expecting Eli Lilly to beat the Street on both profit and revenue.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case we are seeing a small differential between the 2 groups’ EPS forecasts and a wide margin on revenue predictions.
By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market’s actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The distribution of estimates published by analysts on the Estimize.com platform range from 71c to 80c EPS and $5.391B to $5.669B in revenues. This quarter we’re seeing a moderate distribution of estimates compared to previous quarters.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market, which could mean greater volatility post earnings.
Throughout the quarter Wall Street lowered its EPS consensus from 80c to 73c and the Estimize consensus reduced its consensus from 76c to 74c. Wall Street dropped its revenue forecast from $5.631B to $5.485B while Estimize expectations increased from $5.493B to $5.521B. Timeliness is correlated with accuracy and at the end of the quarter we saw converging EPS numbers and diverging revenue expectations.
The analyst with the highest estimate confidence rating this quarter is roncarp who projects 73c EPS and $5.488B in revenue. roncarp is ranked 329th overall among over 3,650 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case roncarp has very similar expectations to the Wall Street consensus.
This quarter analysts on the Estimize.com platform are expecting LLY to beat Wall Street expectations by a small margin on profit and revenue. Pharmaceutical earnings have been strong so far in 2014 and analysts are expecting more of the same from Eli Lilly and Co.