Chances are, you have used an Eli Lilly product or you know someone who has. The company was the first pharmaceutical maker to mass produce Jonas Salk’s famous polio vaccine, and before that was known for introducing insulin into the commercial drug markets.

Historical success has made Lilly (LLY – Research Report) a major player in today’s pharmaceutical industry. As well as developing groundbreaking drugs for migraines and diabetes, LLY is also trialing Tanezumab for cancer and osteoarthritic pain alongside partner Pfizer (PFE). To put it bluntly, Eli Lilly and Company is a giant in the health care sector.

But how is Lilly as an investment? Stock markets are looking a bit shaky in recent weeks, and one common maneuver traders use to cover themselves in that situation is to shift money into defensive stocks. Looking at LLY’s market performance, we see it stood at $107 on October 1, just before a rash of upbeat reviews started arriving, and analyst optimism bumped it up to $115 a week later. The general dip that hit the equity markets that week pulled LLY back down, and it’s currently standing at $108.

The analyst consensus remains a ‘Strong Buy,’ with an upside potential of 18%. The average price target is $125.

So why the rosy outlook? Top market analysts have just given Lilly five ‘Buy’ ratings in the last three weeks. 

Earnings are Up, Costs are Down

The positive reviews started with John Boris (Track Record & Ratings) of SunTrust Robinson, who wrote on October 1 that Lilly is “positioned to drive earnings growth faster than sales, as gross margin and fixed cost leverage yield operating margin expansion.” In its most recent earnings report, for Q2, Lilly reported revenue of $6.36 billion, well above the estimates and up 9% from the same quarter last year. After adjustments, earnings per share also beat the estimates. Adjusted EPS was up almost 50% from last year’s Q2. Combined with a reported drop in expenses, strong year-over-year growth is a sign of underlying strength.