ELI LILLY FACES RATING DOWNGRADE DUE TO SALES ISSUES, WHILST MOODY’S STOCK REACHES ITS ALL TIME HIGH

Erste Group, one of the main European banking groups based in Austria, recently modified its rating of portfolio holding Eli Lilly (LLY) (0.2 units purchased @582.99). Its recommendation changed from Buy to Hold and the main factors that contributed to this downgrade are two ratios: inventory/sales and receivables/sales. What analysts pointed out is that, despite the positive expectations about Eli Lilly’s earnings trend in the near future, the previously cited ratios increased too much, reaching their highest values in the last 6 years. A high inventory/sales ratio may indicate an overstocking or a worrying decrease in customers’ demand, while a rising value for receivables/sales probably reflects the difficulties faced by Eli Lilly in converting its sales into actual cash. The latter will probably lead to negative impacts on the firm’s capacity of facing short-term obligations as well as an increase in the credit risk it currently faces against its clients. At the same time, Eli Lilly’s recent financial results were still positive, considering the 42% revenue increase during the third quarter of 2024 (a positive result reached thanks to the growing sales of the diabetes and cancer drugs Mounjaro and Zepbound estimated in more than $3 billion) as well as the EPS rising from just $0.10 in Q3 2023 to $1.18 in the same quarter of 2024. In addition to this, LLY revised upward its total revenue projection for 2024, switching to a range between $45.4 billion to $46 billion. These elements suggest that Eli Lilly will probably still be able to face and possibly revert the apparent unsatisfactory sales trend highlighted by the increasing ratios.

A remarkable financial performance and positive overall market sentiment are the main drivers of the recent sharp rise in portfolio holding Moody’s Corp. (MCO) (0.1386 units purchased @405.32) stock price, with the latter reaching a value of $495.4. This result comes as no surprise, considering the positive trend experienced by Moody’s equity during the last year (+36.74%), which is also a positive signal for potential shareholders’ investment. In addition to this, the credit rating agency also recently disclosed a revenue increase of 23% and a 32% surge in adjusted diluted EPS for Q3 2024, developments made possible mainly by a huge growth in transactional revenue (almost +70%). Other positive results have been achieved with respect to the revision of both revenue guidance and adjusted operating margin expectations. Finally, after signing a partnership agreement at the beginning of 2024, Moody’s also proceeded with the acquisition of Numerated Growth Technologies, an operation carried out in order to enhance the features of Moody’s lending suite for lenders worldwide. All these elements suggest a very positive operational trajectory for the New York-based company.