Animal health company Elanco (NYSE: ELAN) reported Q1 CY2025 results beating Wall Street’s revenue expectations, but sales were flat year on year at $1.19 billion. The company’s full-year revenue guidance of $4.55 billion at the midpoint came in 1.1% above analysts’ estimates. Its non-GAAP profit of $0.37 per share was 21.5% above analysts’ consensus estimates.
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Elanco (ELAN) Q1 CY2025 Highlights:
- Revenue: $1.19 billion vs analyst estimates of $1.16 billion (flat year on year, 2.4% beat)
- Adjusted EPS: $0.37 vs analyst estimates of $0.30 (21.5% beat)
- Adjusted EBITDA: $276 million vs analyst estimates of $251.1 million (23.1% margin, 9.9% beat)
- The company lifted its revenue guidance for the full year to $4.55 billion at the midpoint from $4.48 billion, a 1.5% increase
- Management reiterated its full-year Adjusted EPS guidance of $0.83 at the midpoint
- EBITDA guidance for the full year is $850 million at the midpoint, below analyst estimates of $864 million
- Operating Margin: 28.8%, up from 7.2% in the same quarter last year
- Constant Currency Revenue rose 4% year on year (-4% in the same quarter last year)
- Market Capitalization: $4.72 billion
"Elanco exceeded first quarter guidance for revenue, adjusted EBITDA, and adjusted EPS," said Jeff Simmons, President and CEO of Elanco.
Company Overview
Originally established as a division of pharmaceutical giant Eli Lilly before becoming independent in 2018, Elanco Animal Health (NYSE: ELAN) develops and sells medications, vaccines, and other health products for pets and farm animals across more than 90 countries.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Elanco grew its sales at a decent 8.1% compounded annual growth rate. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Elanco’s recent performance shows its demand has slowed as its revenue was flat over the last two years. 
Elanco also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 2.4% year-on-year growth. Because this number is better than its normal revenue growth, we can see that foreign exchange rates have been a headwind for Elanco. 
This quarter, Elanco’s $1.19 billion of revenue was flat year on year but beat Wall Street’s estimates by 2.4%.
Looking ahead, sell-side analysts expect revenue to grow 2.4% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Operating Margin
Although Elanco was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 5.4% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
On the plus side, Elanco’s operating margin rose by 25.4 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming in on its more recent performance, we can see the company’s trajectory is intact as its margin has also increased by 2.5 percentage points on a two-year basis.
This quarter, Elanco generated an operating profit margin of 28.8%, up 21.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Elanco’s flat EPS over the last five years was below its 8.1% annualized revenue growth. However, its operating margin actually expanded during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.
We can take a deeper look into Elanco’s earnings to better understand the drivers of its performance. A five-year view shows Elanco has diluted its shareholders, growing its share count by 23.6%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals. 
In Q1, Elanco reported EPS at $0.37, up from $0.34 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Elanco’s full-year EPS of $0.94 to shrink by 14.7%.
Key Takeaways from Elanco’s Q1 Results
We enjoyed seeing Elanco beat analysts’ EPS expectations this quarter. We were also glad its constant currency revenue outperformed Wall Street’s estimates. On the other hand, its full-year EBITDA guidance missed. Overall, we think this was still a solid quarter with some key areas of upside. The stock traded up 3.5% to $9.84 immediately following the results.
Elanco put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
