Eli Lilly and Company

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Bullish +62

Eli Lilly (LLY) Posted 48% Revenue Growth. Why Does the Stock Trade Below Its Average Multiple?

Drug approval Earnings report Guidance raised AI-generated analysis

πŸ“ˆ Eli Lilly reported 48% revenue growth in Q2 2026, driven by a 60% jump in volume despite a 13% decline in realized prices.

πŸ’Š Mounjaro generated $9.9 billion and Zepbound added $4.9 billion in the second quarter, solidifying Lilly's dominance in the weight-loss market.

πŸš€ Foundayo, a new once-daily weight-loss pill, booked $98 million in sales during its first quarter of availability.

πŸ”¬ Lilly plans to file FDA data for retatrutide, a triple-action obesity drug, in Q1 2027 after completing clinical packages for sleep apnea and osteoarthritis.

πŸ’° Management raised full-year 2026 revenue guidance to $85-$87 billion, up from the previous $82-$85 billion range.

πŸ“‰ Non-GAAP gross margins held steady at 86.3% due to a richer product mix and cheaper production costs offsetting price declines.

🌍 International revenue surged 80% to $8.6 billion, with key medicines in immunology, oncology, and neuroscience growing 121%.

πŸ“Š The stock trades at 30.94x forward earnings, down from a five-year average of 45.59x, reflecting market pricing of growth sustainability.

⚠️ Management explicitly flags risks related to pricing pressure and the company's dependence on a few product classes for future revenue.

Bullish Signals
  • Revenue grew 48% in Q2 2026, with volume jumping 60% while realized prices fell only 13%, demonstrating strong demand elasticity.
  • Mounjaro brought in $9.9 billion and Zepbound added $4.9 billion in the quarter, confirming massive scale in the weight-loss category.
  • Non-GAAP gross margin reached 86.3% despite price cuts, aided by cheaper production costs and a richer product mix.
  • Foundayo generated $98 million in first-quarter sales, validating the commercial potential of the new once-daily oral formulation.
  • Management raised full-year 2026 revenue guidance to $85-$87 billion, signaling confidence in continued expansion.
  • Revenue outside the US rose 80% to $8.6 billion, diversifying the company's geographic exposure and reducing reliance on domestic markets.
Risk Factors
  • Realized prices fell 13% overall, with a 36% decline overseas due to Mounjaro joining China's national reimbursement list.
  • Management explicitly cites pricing pressure and dependence on a few product classes as key risks in its risk language.
  • The stock trades at 30.94x forward earnings, which is below the five-year average of 45.59x, suggesting the market may be discounting future growth sustainability.
Full Analysis
Eli Lilly (LLY) reported a robust 48% revenue growth in the second quarter of 2026, driven primarily by volume expansion rather than price increases. The company's core weight-loss portfolio remains highly profitable, with Mounjaro generating $9.9 billion and Zepbound adding $4.9 billion in the quarter. Despite a decline in realized prices due to market dynamics and international reimbursement changes, non-GAAP gross margins remained strong at 86.3%. The company is expanding its product pipeline with the launch of Foundayo, a once-daily weight-loss pill that generated $98 million in first-quarter sales. Additionally, Lilly has secured full clinical data for retatrutide, a triple-action obesity drug, and plans to file for FDA approval in the first quarter of 2027. Management also raised its full-year 2026 revenue guidance to between $85 billion and $87 billion. Despite the strong growth, LLY trades at a forward multiple of 30.94x earnings, which is significantly lower than its five-year average of 45.59x but still represents a premium to the broader healthcare sector. Analysts attribute this valuation compression to the company successfully growing earnings into the multiple, though risks remain regarding sustained volume growth and continued pricing pressure.