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Revvity Earnings: Rough Period of Volume Weakness Lingers and Recovery Likely Pushed Out to Mid-2024

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Our $162 fair value estimate remains intact for narrow-moat Revvity RVTY, even as soft demand weighed on its third-quarter results and near-term outlook. Management again lowered full-year 2023 revenue and adjusted EPS forecasts on softer spending by biopharmaceutical clients that will likely persist through the first half of 2024. The moderate updates we made to our full-year 2023 revenue growth assumptions, in line with updated guidance and reflecting recent headwinds, were roughly offset by cash flows generated since our last valuation update, though, resulting in our unchanged valuation. With shares down over 15% on these weak results and guidance, we continue to highlight Revvity as significantly undervalued and continue to view the firm’s long-term outlook as strong, despite its weak near-term prospects.

Third-quarter results showed the impact of weaker demand from biopharmaceutical clients on revenue growth. In the life sciences business in particular, this drag on revenue was only partially offset by slightly increased demand from government and academic clients, leading to a 2% decline year over year. The diagnostics business improved sequentially with the immunodiagnostics business especially in China providing a decent tailwind but was down 9% year over year including COVID-19 and other biopharmaceutical-related headwinds. The lower overall volume as well as product mix pushed third-quarter profitability down, although pricing and cost initiatives helped fend off both these factors and macroeconomic headwinds somewhat.

We view management’s plan to further trim costs as necessary to insulate against continued revenue declines in the near term. The eventual recovery in demand for the firm’s life sciences tools should also support profitability gains in the intermediate term, as near-term uncertainty wanes. Robust growth in the immunodiagnostics and reproductive health businesses should continue driving fundamental growth over the longer term, too.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

Ava Gams

Associate Equity Analyst
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Ava Gams is an associate equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She is responsible for supporting the coverage of cannabis companies, payroll processors, and Internet registries. She also contributes to research, reports, and presentations surrounding environmental, social, and governance metrics and ratings.

Before joining Morningstar in 2021, Gams worked as a financial product specialist focusing on data reconciliation, portfolio performance metrics, and billing. Prior to that, she had experience on strategic consulting projects and researching behavioral economics trends.

Gams holds a bachelor's degree in economics from the University of Michigan.

Julie Utterback

Senior Equity Analyst
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Julie Utterback is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. Within the healthcare industry, she covers medical technology and service companies. She is also the chairperson of the equity research team’s capital allocation methodology.

Utterback joined Morningstar in 2005 as an equity analyst in the healthcare industry. At that time, she covered medical technology companies, including orthopedic device, medical equipment, and cardiac device firms. In 2010, she joined Morningstar's credit research team, initiating coverage of the entire healthcare industry and generally helping the organization expand and maintain its credit coverage across many industries. She held that senior credit analyst role until April 2019, when she returned to the equity team to cover medical technology and service companies.

Prior to joining Morningstar, Utterback was an equity analyst at State Farm Insurance for several years. She holds a bachelor's degree in finance from the University of Illinois Urbana-Champaign. She also holds the Chartered Financial Analyst® designation.

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