Eli Lilly Earnings Preview: EPS, Sales Growth Expected

, which last week announced a deal to buy two imaging agents from

that could help aid the fight against Alzheimer's, is scheduled to report its first-quarter 2013 results Wednesday, April 24, before the markets open. Investors will be watching for the latest on how the drug maker will react to the loss of its U.S. patent protection on Zyprexa last year and on Cymbalta at the end of this year, as well as any further news on reducing its U.S. sales force. In other words, what is going on in Eli Lilly's pipeline and what further actions might it take to reduce costs?

Analysts on average predict that Eli Lilly will report revenue for the quarter that totaled $5.66 billion, which would be marginally higher than in the year-ago quarter. Earnings of $1.05 per share are also in the consensus forecast. That would be up from a reported profit of $0.92 per share in the comparable period of last year. That the consensus earnings per share (EPS) estimate is the same as it was 60 days ago. Also note that Eli Lilly has fallen short of consensus EPS expectations in just one of the past ten quarters. Back in the fourth quarter, EPS beat expectations by about nine percent. The CEO said in the fourth-quarter report, "[W]e successfully offset a large part of the revenue decline from the Zyprexa patent expiration with growth in other products such as Cymbalta, Forteo, Alimta, Effient and our animal health portfolio. … At the same time, we continued to control costs while investing in R&D in order to replenish and advance our pipeline." The share price pulled back fractionally in the days following the fourth-quarter report. Looking ahead to the current quarter, the forecast currently calls for a 16 percent year-over-year increase in earnings to $0.99 per share. That EPS estimate has ticked down in the past 60 days from $1.00 though. And revenue for the quarter is expected to be up less than five percent at $5.86 billion. But full-year revenue is so far expected to be less than two percent higher, relative to a year ago.

Eli Lilly & Co. develops and manufactures pharmaceutical products, including neuroscience products, endocrinology products, oncology products, as well as animal health products. It is the world's largest manufacturer and distributor of psychiatric medications. The company was founded in 1876 and its headquarters are now in Indianapolis. Eli Lilly is a component of the S&P 500, and it has a market capitalization of about $63.8 billion. Dr. John C. Lechleiter has served as chairman of the board since January 2009, and he has been chief executive officer since April 2008. Competitors include

, which is forecast to post declining first-quarter EPS and sales later this month, and

, which is expected to say its per-share earnings grew but revenue fell year-over-year in the most recent quarter. During the three months that ended in March, Eli Lilly announced positive phase 3 results for a diabetes treatment and later submitted it to the FDA, got European Union approval for an injection for patients with cognitive impairment and discontinued phase 3 trials of a rheumatoid arthritis drug.

Eli Lilly's 15.9 price-to-earnings (P/E) ratio is lower than the industry average. Its operating margin is better than the industry average, and it has a return on equity of almost 29 percent. The dividend yield is near 3.4 percent. The number of Eli Lilly shares sold short, as of the March 28 settlement date, represents a little more than one percent of the float. The two percent decline in short interest in late March ended a three-period rise in short interest. But days to cover rose to more than three. Only seven of the 20 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares. For the past three months, the consensus recommendation has been to hold shares. The share price has overrun the analysts' mean price target, or where they expect the stock to go. But a positive earnings surprise or rosy guidance could prompt hikes in analysts' target prices. The share price is more than 16 percent higher year to date and reached a multiyear high this morning. It is above the 50-day and 200-day moving averages. Over the past six months, Eli Lilly's performance has been in line with the S&P 500, but it has underperformed the competitors mentioned above.