Ahead of Earnings, Is Eli Lilly Stock a Buy, a Sell, or Fairly Valued?

Eli Lilly is set to release its second-quarter 2026 earnings report on Aug. 5. Here’s Morningstar’s take on what to look for in Lilly’s earnings and the outlook for its stock.

Key Morningstar Metrics for Eli Lilly

• Fair Value Estimate
  : $900.00
• Morningstar Rating
  : ★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : High

Eli Lilly Earnings Release Date

• Wednesday, Aug. 5, before the start of trading

What to Watch in Eli Lilly’s Q2 Earnings

• Competition: So far, Lilly’s oral GLP-1, Foundayo, has had a weaker launch in the United States, based on second-quarter prescription data, compared with Novo Nordisk’s Wegovy pill launch, which has been strong since January. We expect Lilly to gain some momentum with advertising in the US and upcoming international launches, with potential approval later this year for Foundayo in diabetes. In the long term, we think Lilly could have the edge internationally due to sheer supply. (Foundayo is easier to manufacture, and Lilly already has significant inventory.) We’re also looking for more information on how Lilly will approach Foundayo’s cash-pay launches internationally, as we expect an aggressive approach, given the strong competition from Novo.
• Injectable medicine data: Eloralintide and retatrutide pipeline updates could further improve sentiment, though we’re bullish on upcoming eloralintide data. We’re still watching for data from a large cardiovascular outcomes study (not expected until 2029). For eloralintide, we’re waiting for phase 2 Zepbound combination data later this year to see if this could be another way to boost efficacy, but with minimal additional tolerability concerns.
• Market share: Lilly’s market share gains and overall GLP-1 demand should more than counter pricing pressure. We think the popularity of Lilly’s Mounjaro/Zepbound against injectable Wegovy, the increased demand at lower prices, and a strong international growth story for this medicine should drive 33.5% topline growth for Lilly this year. We’re looking for additional commentary from management on improved US access to GLP-1 therapies in obesity across Medicare and Medicaid, and we think this could contribute to growth beginning in 2027.
• Stock: Lilly has been aggressive in investing in therapeutic areas, including very high-risk/high-reward technologies. While we like seeing Lilly diversify, we still think the bar is set very high for Lilly in the long run, and shares look overvalued at recent prices. We think market expectations remain high, and we’re watching to see if Lilly can maintain its almost impeccable track record on marketing strategy, pipeline data, and business development.

The following are excerpts from Morningstar’s company report on Eli Lilly.

Fair Value Estimate for Eli Lilly

With its 2-star rating, we believe Lilly stock is moderately overvalued compared with our long-term fair value estimate of $900 per share. We are maintaining our fair value estimate as a higher weighted average cost of capital assumption is countered by our addition of new pipeline programs to our valuation model.

Read more about Eli Lilly’s fair value estimate.

Economic Moat Rating

Patents, economies of scale, and a powerful distribution network support Eli Lilly’s wide moat. Lilly’s patent-protected drugs carry strong pricing power, which enables the firm to generate returns on invested capital well in excess of its cost of capital. Further, the patents give the company time to develop the next generation of drugs before generic competition arises.

We think the firm faces environmental, social, and governance risks, particularly related to potential US drug-price policy reforms aimed at increasing access by lowering drug prices (close to 60% of total sales are generated by prescription drugs in the US). Ongoing product governance issues, including litigation related to side effects and patents, also weigh on the company. While we have factored these threats into our analysis, we don’t see them as material to our moat rating.

Read more about Eli Lilly’s economic moat.

Financial Strength

With strong cash flows derived from a stable and diversified product portfolio, Eli Lilly remains on solid financial footing. We expect debt/EBITDA to fall from 3 times in 2023 to below 1 time in 2026. With its strong growth prospects, we don’t expect Lilly will need to make any major acquisitions to drive growth. Nevertheless, we expect tuck-in acquisitions will augment growth for the firm over the next decade.

Read more about Eli Lilly’s financial strength.

Risk and Uncertainty

We are maintaining our High Uncertainty Rating for Lilly, given highly variable outcomes for several key drug launches. Most big biopharma firms tend to have Medium Uncertainty Ratings. However, diabetes and weight-loss drugs Mounjaro/Zepbound are becoming major new drugs, and the cone of uncertainty around them is higher, as several variables are affecting their sales potential, especially for the weight-loss indication, including levels of insurance coverage and pricing. Beyond product-specific uncertainties, Lilly faces tough competition from generics manufacturers and brand-name drugmakers.

The company encounters considerable regulatory and legal risks, including product approvals, patent challenges, and liability lawsuits. Our rating is not materially affected by ESG risks, although we see access to basic services (tied to drug pricing) as the biggest ESG risk that the firm needs to manage.

Read more about Eli Lilly’s risk and uncertainty.

LLY Bulls Say

• Lilly’s strong leadership in weight-loss drugs should drive industry-leading growth, given its approved drugs and well-positioned next-generation weight-loss drugs in the pipeline.
• Lilly is following its maturing cancer drug Verzenio with newer oncology therapies Inluriyo and Jaypirca, maintaining strong oncology growth potential.
• Lilly has launched a new Alzheimer’s drug (Kisunla) that could become a major blockbuster, especially since few treatment options exist for the disease.

LLY Bears Say

• The risks to Kisunla’s success remain high due to bottlenecks in patient diagnosis, required scans and monitoring, and competition, particularly from Eisai/Biogen (Leqembi) and Roche (pipeline drug trontinemab).
• Several of the company’s next-generation cardiometabolic drugs could lead to cannibalization of current approved Lilly drugs, particularly the widely used Mounjaro/Zepbound.
• Competition for the weight-loss drug Zepbound could significantly increase over the next three years from established competitor Novo Nordisk and new entrants.

This article was compiled by Irza Waraich.