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A Look at AstraZeneca’s and Eli Lilly’s Tax and Debt

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Mar. 1 2019, Updated 10:30 a.m. ET

Tax rate projections

In fiscal 2018, AstraZeneca (AZN) and Eli Lilly (LLY) reported effective tax rates of 3% and $15.98%, respectively. Analysts expect AstraZeneca’s effective tax rate to be 18%, 18%, and 17.9% in fiscal 2019, fiscal 2020, and fiscal 2021, respectively. According to AstraZeneca’s fourth-quarter conference call, the company expects its core tax rate to be 18%–22% in fiscal 2019.

Analysts expect Eli Lilly’s effective tax rate to be 15.44%, 15.75%, and 15.75% in fiscal 2019, fiscal 2020, and fiscal 2021, respectively. In its fourth-quarter conference call, the company said it expects its GAAP and non-GAAP EPS to be 16.5% and 15%, respectively, in fiscal 2019.

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Net debt projections

Analysts expect AstraZeneca’s net debt to be $15.04 billion, $13.50 billion, and $9.60 billion in fiscal 2019, fiscal 2020, and fiscal 2021, respectively, implying YoY changes of 15.63%, -10.22%, and -28.92%. AstraZeneca reported net debt of $13.0 billion in fiscal 2018, almost flat with its net debt of $12.7 billion in fiscal 2017. According to an AstraZeneca investor presentation, the company used its EBITDA of $7.1 billion to cover its dividends of $3.5 billion, capex of $1.0 billion, and other major spending items. The company’s net-debt-to-EBITDA ratio was 1.83x in fiscal 2018.

Analysts have projected Eli Lilly’s net debt to be $7.83 billion, $7.02 billion, and $4.99 billion in fiscal 2019, fiscal 2020, and fiscal 2021, respectively, implying YoY changes of 67.12%, -10.33%, and -28.92%. The company’s net-debt-to-EBITDA ratio was 0.60x in fiscal 2018.

Eli Lilly had lower absolute net debt and a lower net debt-to-EBITDA ratio than AstraZeneca in fiscal 2018. Next, we’ll discuss key growth drivers for AstraZeneca in fiscal 2019.

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