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Lilly's (LLY) Risk/Reward Looks Good Ahead of Q3 Report - BMO

October 16, 2015 10:45 AM EDT
Get Alerts LLY Hot Sheet
Price: $777.96 -0.03%

Rating Summary:
    24 Buy, 8 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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BMO is out with positive commentary on Eli Lilly (NYSE: LLY), saying that the risk/reward on the stock looks good at this point, but not enough to change the firm's rating.

Alex Arfaei said, In 3Q15, we expect a ~9% bottom line beat (BMO $0.82 vs. Street $0.75) driven by lower OPEX, and slightly higher revenues and gross margin. We forecast that Lilly is on track to exceed its current 2015 guidance. Our tax rate and EPS forecasts include the R&D tax credit, whereas Lilly’s guidance does not.

Arfaei continued, We continue to estimate 60% probability of success for Sola in AD, and include risk-adjusted sales of $7.6 billion by 2024, accompanied by margin expansion. However, as the failure of Evacetrapib illustrated, we believe Lilly’s current valuation reflects somewhat high expectations for Sola. If Sola fails in EXPEDITION-3, we estimate LLY could drop ~30%. Conversely, if we increase our Sola probability of success to 100%, with sales of $13 billion in 2024, we see ~40-50% upside.

BMO rates Eli Lilly at Market Perform with a $90 price target.

For an analyst ratings summary and ratings history on Eli Lilly click here. For more ratings news on Eli Lilly click here.



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