The 2024 Q3 earnings season continues at a rapid pace, with a nice variety of companies delivering quarterly results daily.
So far, several popular stocks, namely Advanced Micro Devices AMD and Eli Lilly LLY – have reported quarterly results, with the two seeing negative post-earnings reactions.
But did the results warrant the knee-jerk reaction? Let’s take a closer look at each release.
AMD Reports Record Data Center Results
Concerning headline figures in the release, AMD posted a 1.1% beat relative to the Zacks Consensus EPS estimate and reported sales 1.5% ahead of expectations, reflecting growth rates of 31% and 17%, respectively.
Margin expansion helped lead to higher profits, with its gross margin of 54% comparing favorably to the 47% mark in the year-ago period. Margin expansion has been present for several periods, providing notable tailwinds.
Below is a chart illustrating the company’s margins on a trailing twelve-month basis.
Image Source: Zacks Investment Research
Notably, the company is now on track to deliver record annual revenue for 2024 thanks to significant growth among its Data Center and Client segments. In fact, Data Center revenue of $3.5 billion reflected a quarterly record, up an astonishing 122% on a year-over-year stack. The ramp-up of AMD Instinct GPU shipments and growth in AMD EPYC CPU sales drove the record results.
Lisa Su, CEO, said:
“Looking forward, we see significant growth opportunities across our data center, client and embedded businesses driven by the insatiable demand for more compute.”
Despite the record results, the stock didn’t see a great reaction following the print, with shares down nearly 5% in 2024 overall. The valuation picture here isn’t rich, though, with the current 1.1X PEG ratio comparing favorably to a 1.2X five-year median and 6.5X five-year highs.
Image Source: Zacks Investment Research
The company’s earnings outlook has taken a hit across the board following the release, undoubtedly a key development worth tracking.
Image Source: Zacks Investment Research
Eli Lilly Trims Outlook
Eli Lilly fell short of both our consensus EPS and sales expectations, reflecting misses of 22% and 5%, respectively. Sales grew a strong 20% year-over-year, whereas EPS of $1.18 per share was up more than 1000% due to easy comps.
15% higher volumes and 6% higher realized prices helped lead the strong sales growth, with flagship offerings such as Mounjaro and Zepbound contributing significantly. Below is a chart illustrating the company’s sales on a quarterly basis.
Image Source: Zacks Investment Research
The most obvious answer to the negative reaction following the release can be attributed to a guidance trim, with LLY lowering its FY24 sales outlook. LLY had originally forecasted 2024 sales in a band of $45.4 – $46.6 billion, now being lowered into a range of $45.4 – $46.0 billion.
Analysts have lowered their sales outlook for its current fiscal year following the guidance trim, as shown below.
Image Source: Zacks Investment Research
The growth picture here still remains robust though after the trim, with LLY forecasted to post 110% EPS growth on 34% higher sales in its current fiscal year. Growth among Mounjaro and Zepbound is expected to remain strong, underpinned by a snowball of demand. Mounjaro sales of $3.1 billion melted 120% higher throughout the period.
Bottom Line
Both companies above – Advanced Micro Devices AMD and Eli Lilly LLY – saw negative reactions to their quarterly releases despite posting big growth.
All in all, both companies are on a high-growth trajectory, with AMD benefiting heavily from the AI frenzy and LLY enjoying tailwinds from GLP-1 offerings.
The LLY reaction seems to be explained by a sales guidance trim, with analysts also unsurprisingly trimming their EPS expectations following the announcement.
The negative AMD reaction could be explained by soft guidance for its upcoming Q4 release, with forecasts from the company primarily in line with previous consensus expectations.
Due to negative earnings estimate revisions and a guidance trim from LLY, both stocks could see adverse price action in the near term, but their long-term growth stories undoubtedly remain fully intact and remain highly attractive for those with patience.
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Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
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