Dr. Reddy's Laboratories Limited Just Missed EPS By 29%: Here's What Analysts Think Will Happen Next
Dr. Reddy's Laboratories Limited (NSE:DRREDDY) shareholders are probably feeling a little disappointed, since its shares fell 4.9% to ₹1,152 in the week after its latest first-quarter results. It looks like a pretty bad result, all things considered. Although revenues of ₹81b were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 29% to hit ₹5.32 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.
After the latest results, the 37 analysts covering Dr. Reddy's Laboratories are now predicting revenues of ₹351.1b in 2027. If met, this would reflect a modest 6.0% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to expand 15% to ₹45.69. Yet prior to the latest earnings, the analysts had been anticipated revenues of ₹355.9b and earnings per share (EPS) of ₹50.41 in 2027. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.
View our latest analysis for Dr. Reddy's Laboratories
It might be a surprise to learn that the consensus price target was broadly unchanged at ₹1,269, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Dr. Reddy's Laboratories analyst has a price target of ₹1,739 per share, while the most pessimistic values it at ₹1,038. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Dr. Reddy's Laboratories shareholders.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Dr. Reddy's Laboratories' revenue growth is expected to slow, with the forecast 8.1% annualised growth rate until the end of 2027 being well below the historical 12% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 12% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Dr. Reddy's Laboratories.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Dr. Reddy's Laboratories. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Dr. Reddy's Laboratories going out to 2029, and you can see them free on our platform here.
Before you take the next step you should know about the 1 warning sign for Dr. Reddy's Laboratories that we have uncovered.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.