Jefferies: LLY Q1 Earnings Could Be Under Pressure

Eli Lilly's LLY Q1 earnings could be under pressure due to “higher operational costs including the excise fee despite better revenue growth,” Jefferies reports. “We forecast Q1'11E revenues to grow 5.7% (4.2% at CER) to US$5.8bn versus consensus estimate of $5.7bn,” Jefferies writes. “We expect the gross margin to improve slightly by 9bp to 79.6% versus 79.5% in Q1'10 due to recent FX movements. However, the Healthcare Reform associated excise fee and the initiation of numerous latestage studies could result in higher SG&A and R&D costs. “We forecast a 2% decline in operating income to $1.67bn versus $1.71bn in Q1'10. Assuming lower other income and a lower tax rate (21.5% vs 27.3%), we expect Q1'11E EPS to decline 2% to $1.15 (Cons $1.17) compared to Q1'10.” Eli Lilly closed Wednesday at $35.68.