Eli Lilly (LLY 2.01%), the largest healthcare company in the world, will report its fourth-quarter and full-year 2025 earnings on Feb. 4. The drugmaker has delivered strong returns in recent years, but earnings season can sometimes surprise investors, and not always in a good way. How is Eli Lilly's stock likely to move after it releases its quarterly update? While trying to time the market is not a method for success, investors are wondering if they should buy the stock before then. Let's find out.
A short look at recent history
It might be helpful to revisit how Eli Lilly's shares reacted after recent earnings updates. And once we do, it's hard to discern a trend. Eli Lilly's third-quarter results were strong, its guidance was excellent, and the stock jumped as a result. But the company's performance was also great during the second quarter, yet its stock price fell sharply due to weaker-than-expected data from a phase 3 clinical trial for its oral GLP-1 candidate, orforglipron.
Image source: Getty Images.
Solid (even slightly above estimates) results might not be enough to jolt the stock price, especially for a company trading at 32.5 times forward earnings estimates, compared to an average of 18.6 for healthcare stocks. Eli Lilly will need much-better-than-expected top-line growth, along with strong guidance and clinical data (if it reports any) that's in line with market expectations.
If Eli Lilly beats analyst estimates, it will be because of tirzepatide, its diabetes and weight loss medicine that became the world's best-selling drug last year and has incredible momentum. However, the drugmaker had to slash the prices of this compound in the weight management market late last year. While this may have led to higher sales volume that offset the lower cost, it's hard to say one way or the other. In other words, it's almost impossible to predict which way the stock will move after its quarterly update.
NYSE: LLY
Key Data Points
Look beyond Feb. 4
Eli Lilly's shares may jump after Feb. 4, or they might drop. Or they could stay flat. Long-term investors shouldn't concern themselves too much with that. The more important question is whether the drugmaker can perform well over the long run. And it does look like Eli Lilly is well-positioned to do so. It remains, for now, the leader in the rapidly growing weight management market, where it should launch at least two brand-new products in the next two years: orforglipron and retatrutide.
Further, Eli Lilly is a diversified company with blockbusters and exciting pipeline candidates in other areas, including immunology and oncology. Lastly, the stock is a great pick for dividend seekers, even with a modest forward yield of 0.6%. Eli Lilly has more than doubled its dividends over the past five years, while its payout ratio remains a conservative 44%. Investors should strongly consider buying the stock now and adding more shares if the stock drops after the company's earnings report on Feb. 4.
