Oil prices reverse early losses as Iran supply fears overshadow Russia measures
On Wednesday, Eli Lilly, the largest holding (15%) in (NYSE:XLV), the State Street healthcare sector ETF, reported earnings well above expectations, and its shares initially rose by 10%. Its fourth-quarter adjusted EPS of $7.54 easily beat the consensus estimate of $6.98. Further boosting Eli Lilly shares, its revenue surged 43% to $19.29 billion, almost $1.5 billion above forecasts.
The impressive growth was largely driven by strong sales of its blockbuster GLP-1 weight-loss drugs, Mounjaro and Zepbound, which continue to dominate the GLP-1 market. To wit, Eli Lilly’s market share rose to 60.5% last quarter. Further boosting the shares of Eli Lilly, the company provided an optimistic 2026 outlook with revenue expectations of $3 to $6 billion above Wall Street forecasts.
The positive market reaction follows recent weakness triggered by a subdued outlook from its competitor, Novo Nordisk.
Some investors claim Eli Lilly shares are expensive, with a P/E of 54. However, this calculation only includes prior earnings. If we incorporate one-year earnings growth expectations, we arrive at a forward P/E of 33, which is still expensive but not as much as the P/E suggests.
However, projecting earnings over the next 3-5 years yields a PEG ratio of 0.71. If Eli Lilly can grow earnings at 46% annually over the next few years, as the market expects, the shares are cheap. To put the robust forecast into context, Nvidia’s expected growth rate is 49%.
ADP And ISM Services
With JOLTS and Friday’s BLS employment report delayed, yesterday’s ADP release is the primary source of employment data for the time being. ADP reported that the economy generated 22k jobs in January, about half of Wall Street’s estimates.
Interestingly, while the ISM Manufacturing survey was very strong, including a decent boost to its employment gauge, the ADP manufacturing employment index continues to show job losses. Yesterday’s reading was the 32nd straight month of declines.
On the heels of the very strong ISM Manufacturing survey, the ISM services gauge was unchanged but remains in expansionary territory (>50) at 53.8. Unlike the manufacturing survey, employment and new orders fell in the service sector.
It’s worth noting that the ISM services gauge is a much more valuable gauge of the broad economy, as the service sector accounts for nearly 80% of GDP. The table below shows the survey breakdown by component.
Tweet of the Day
