Eli Lilly and Company's LLY stock has risen 9.6% since it announced solid third-quarter results on Oct. 29. Lilly's third-quarter earnings and revenues comfortably exceeded estimates. Revenues rose 39% year over year to $24.40 billion while adjusted EPS rose 7% to $7.48. Volume growth of 53% more than offset a 15% decline in realized prices.
Mounjaro and Zepbound remained the primary growth engines, with both drugs outperforming consensus expectations. Newer medicines across oncology, immunology and neuroscience also contributed to growth.
Management raised full-year revenue guidance to $91-92 billion from $85-87 billion, reflecting strong underlying business performance.
However, a single quarter's results are not so important for long-term investors. To make an informed decision on whether to buy, sell or hold the stock, it is important to evaluate the company's fundamentals by examining its key strengths and weaknesses.
Mounjaro and Zepbound Power Lilly's Growth Story
Lilly has seen extraordinary momentum in its cardiometabolic franchise. Its blockbuster drugs, Mounjaro for type II diabetes and Zepbound for obesity, have become some of the fastest-growing medicines in pharmaceutical history, driven by enormous global demand for GLP-1 therapies. These therapies account for around 65% of the company's total revenues and have become key top-line drivers for Lilly, with demand rising rapidly.
In the first nine months of 2026, the drugs generated combined sales of $43.8 billion. Growing patient demand, broader insurance coverage and international expansion are driving Mounjaro and Zepbound's growth.
Lilly also continues to expand the indications and geographic reach of Mounjaro and Zepbound. At the same time, Lilly is spending heavily to increase manufacturing capacity, which is crucial because supply constraints have historically limited the ability of both Lilly and rival Novo NordiskNVO to fully satisfy incretin demand.
Medicare access is becoming an increasingly important growth driver for Lilly's obesity portfolio. Eligible Medicare Part D beneficiaries gained access to Zepbound and Foundayo for weight management through the Medicare GLP-1 Bridge program, beginning July 2026, while Mounjaro already has Medicare coverage for its type II diabetes indication.
On the third-quarter conference call, Lilly said that more than 500,000 patients accessed Lilly's obesity medicines through the program, and 80% were new to incretin treatment.
Foundayo and Retatrutide Strengthen Lilly's Obesity Outlook
Foundayo can prove to be a commercial game-changer for Lilly. Oral pills will be a more convenient alternative to the currently available once-weekly injectable obesity treatments like Zepbound and Novo Nordisk's Wegovy.
The launch uptake for Foundayo has been encouraging, with the drug recording $281 million in sales already in 2026 so far, supported by physician education, broad commercial access and continued international launches. Lilly has secured deals for Foundayo with all three major PBMs.
Foundayo is currently launched in four countries and under regulatory review in more than 40 additional countries, with further approvals expected later this year. Lilly expects to launch Foundayo in most international markets by 2027.
Lilly expects Foundayo to become a multi-indication cardiometabolic opportunity. For the type II diabetes indication, Lilly has filed regulatory applications in several countries, including the United States. In addition to obesity and type II diabetes, Lilly is also evaluating Foundayo in six phase III studies for other diabetes- and obesity-related diseases, with data from some of these expected in the next few months.
Lilly is building what could become a broader next-generation obesity franchise rather than relying solely on tirzepatide. Its late-stage pipeline includes retatrutide, whose triple GIP/GLP-1/glucagon mechanism could potentially deliver greater weight loss and metabolic benefits than existing therapies,
The company is evaluating retatrutide in type II diabetes and obesity, along with other indications like obstructive sleep apnea (OSA), knee osteoarthritis, chronic low back pain and MASLD, in late-stage studies. Across its phase III TRIUMPH program, retatrutide has demonstrated substantial weight loss, reductions in A1C and improvements in certain cardiovascular risk factors, knee osteoarthritis pain and OSA severity.
Lilly has completed the clinical data package needed to support global regulatory submissions for retatrutide in obesity, OSA and knee osteoarthritis pain. The company plans to submit the treatment to the FDA in the first quarter of 2027. If approved, retatrutide could become another multibillion-dollar product
LLY Successfully Diversifies Beyond GLP-1
Lilly's investment case is no longer dependent solely on its GLP-1 franchise. Its newer non-GLP-1 therapies such as Omvoh, Jaypirca, Ebglyss, Kisunla and Inluriyo are gaining traction and have become meaningful growth contributors, with the positive trend expected to continue. Key product revenues outside cardiometabolic health doubled in the third quarter.
Lilly has also embarked on an aggressive M&A spree in the past couple of years, acquiring biotech companies across oncology, neuroscience, cardiovascular disease, gene editing, inflammation, cell therapy and vaccines to diversify its long-term growth drivers beyond GLP-1 therapies. The company has announced more than $20 billion in biotech deals this year.
Intense Competition in the Obesity Market
Novo Nordisk had gained approval for an oral version of its obesity drug, Wegovy, in December 2025 and launched the pill in January 2026.
While Lilly and Novo Nordisk currently dominate this space, smaller biotechs like Structure Therapeutics and Viking Therapeutics are also developing oral GLP-1 drugs for treating obesity.
Novo Nordisk's other novel candidate in its obesity pipeline is CagriSema, a once-weekly fixed-dose combination of cagrilintide, a long-acting amylin analog, and semaglutide, a GLP-1 receptor agonist. In phase III studies, this candidate has shown 22.7% weight loss. NVO has already filed a new drug application with the FDA seeking approval of CagriSema for obesity, with a U.S. decision expected in the fourth quarter of 2026. Other phase III obesity candidates include cagrilintide and zenagamtide (formerly amycretin), a single-molecule dual GLP-1/amylin receptor agonist.
Roche, PfizerPFE, Merck and AbbVie have also licensed obesity candidates, potentially challenging Novo Nordisk and Eli Lilly's dominance. Pfizer's November 2025 acquisition of Metsera added potential competitor, berobenatide (formerly MET-097i), an injectable GLP-1 receptor agonist now in phase III studies evaluating weekly and monthly dosing for obesity.
LLY's Stock Price, Valuation and Estimates
Lilly's stock has risen 31.4% so far this year compared with the industry's increase of 24.6% over the same timeframe. The stock has also outperformed the sector and S&P 500 index, as seen in the chart below.
LLY Stock Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
From a valuation standpoint, Lilly's stock is expensive. Going by the price/earnings ratio, the company's shares currently trade at 30.97 forward earnings, higher than 20.06 for the industry. However, the stock is trading below its 5-year mean of 34.57.
LLY Stock Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2026 has risen from $33.56 to $33.92 per share over the past seven days, while that for 2027 has risen from $47.23 to $47.75 per share over the same timeframe.
LLY Estimate Movement
Image Source: Zacks Investment Research
Stay Invested in LLY Stock
Lilly has its share of problems. Pricing pressure is becoming increasingly visible. Worldwide realized prices fell 15% during the third quarter, including a 7% decline in the United States and a 29% decline internationally. Price is expected to continue to be a drag on top-line growth in 2027 as well. Rising competition in the GLP-1 diabetes/obesity market is a key headwind. Also, sales of late life-cycle products like Trulicity and Taltz have declined this year.
The stock is also steeply valued. At roughly 30 times forward earnings and a market capitalization above $1.3 trillion, the market already expects Lilly to execute extremely well.
Nonetheless, Lilly remains one of the most compelling growth stories in the pharmaceutical industry, supported by its significant price appreciation in the past few years, dominant position in the rapidly expanding obesity and diabetes markets, a diversified late-stage pipeline and strong financial performance. While the stock trades at a premium valuation after a remarkable multi-year rally, the company's long-term growth prospects remain among the strongest in the healthcare sector.
An existing investor should continue to retain this Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
