Eli Lilly (LLY) reported mixed fourth-quarter results Thursday morning, but we’re looking through the stock’s post-earnings sell-off because there’s no change to the pharmaceutical giant’s bright long-term potential. Notably, the company’s potential blockbuster obesity drug remains on track to be cleared by U.S. regulators by the second half of this year — encouraging news for shareholders, like us at the Club, whose investment case counts on the weight-loss therapy’s success. Revenue fell nearly 9% year-over-year, to $7.3 billion, missing analysts’ expectations for $7.33 billion, according to estimates compiled by Refinitiv. Much of the sales decline is tied to the loss of Covid-19 antibody revenue. Adjusted earnings-per-share (EPS) of $2.09 comfortably beat analysts’ forecasts of $1.78, according to Refinitv. Bottom line There’s definitely some noise surrounding Eli Lilly’s results, including sales of its key diabetes drug Mounjaro. But that’s not the only reason for the stock’s more than 5% decline in Thursday trading. A lot of this move lower is due to a vicious market rotation out of stocks that did well in 2022 like health care, energy, and consumer staples in favor of technology and other areas that were crushed last year by inflation and massive slowdowns in their business. Lilly is a high-quality company with a great long term outlook and no major patent cliffs in the near term. With the market putting it on sale Thursday, we are upgrading our rating to a 1 , meaning we would buyers right here. Q4 commentary Investors are intently focused on Mounjaro’s sales because it is the same molecule — known scientifically as tirzepatide — that’s being studied for obesity treatment. Launched in June 2022, Mounjaro is currently approved to treat only Type 2 diabetes. Optimism around the drug is rooted in its promise to treat multiple conditions, including obesity, dramatically expanding its sales potential and fueling Lilly’s growth for years to come. Sales…
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