Revvity Earnings: Key Markets Still Uncertain, But Some Relief Expected Soon After COVID-19 Reset

Revvity’s RVTY weak second quarter came in about as expected, even when including continued slowing of demand by biopharmaceutical customers in China that weighed on revenue growth. The prolonged impediment to topline performance increases uncertainty heading into the second half of 2023 and caused management to slightly decrease full-year guidance from prior projections (down 3% at the midpoint for both revenue and adjusted earnings per share). We have slightly reduced our full-year forecasts to reflect that uncertainty, roughly in line with updated guidance, but those changes did not materially affect our $162 fair value estimate, which is based on longer-term assumptions for the narrow-moat firm. Shares remain moderately undervalued at current prices.

Quarterly group revenue declined 21% year over year on the demand weakness noted above and the resetting of volume trends after strong results last year related to coronavirus demand. However, steady growth from core drivers remained intact. The life sciences business grew 3% year over year on double-digit growth in demand by academic and government clients. Excluding significant drag from COVID-19-related sales, the diagnostics segment increased 8%, reflecting the return of solid demand for immunodiagnostics in China as well as the strength of Revvity’s neonatal offering. Adjusted EPS was down year over year, but it improved sequentially in the second quarter, suggesting the firm’s cost savings and pricing initiatives are helping to partially offset the ongoing slump in revenue growth.

To us, the firm’s durable fundamental growth provides encouragement that Revvity can continue weathering near-term headwinds to achieve longer-term forecasts and defend its market-leading position in immunodiagnostics, reproductive health, and life sciences. We still estimate about 5% growth compounded annually through 2027 for both revenue and adjusted EPS, driven in part by strong recurring revenue across its diverse product offering.