RVTY: Operating Margins And Buyback Plan Will Drive Share Recovery Ahead

Key Takeaways

• Expansion in high-growth software and diagnostics, alongside product mix shift, is driving recurring, higher-margin revenue and robust earnings growth.
  
• Strategic investments, contract wins, and aggressive share buybacks are supporting revenue momentum, operational flexibility, and enhanced capital returns.
  
• Regulatory shifts, weak end-market demand, margin pressures, trade risks, and limited growth investments threaten Revvity's long-term profitability and competitive strength.

Catalysts

Provides health sciences solutions, technologies, and services worldwide.

• Accelerating adoption of Revvity's high-growth software solutions (30%+ organic growth in Signals, record orders, high ARR and net retention), driven by pharma/biotech spending on digital transformation, supports sustained revenue growth and recurring, higher-margin streams.
  
• Secular demand for advanced diagnostics, driven by aging populations and expansion of personalized medicine, is reflected in robust growth for reproductive health and newborn screening businesses (high single-digit global growth), positioning these segments to drive topline revenue and earnings expansion.
  
• Ongoing shift in product mix toward higher-margin, software-enabled and consumables-driven offerings (e.g., SaaS Signals, reagents, new IDS i20 platform), along with structural cost actions, are expected to materially expand operating and net margins, with 2026 set to start at a higher 28% operating margin baseline.
  
• Strategic investments and contract wins (e.g., Genomics England sequencing ramp–$10M visibility and pipeline for further assays/new products) leverage global R&D funding growth and genomics advances, expanding the customer pool and supporting revenue acceleration.
  
• Aggressive share repurchase activity (nearly $450M in H1 2025, ~6% share count reduction over 12 months) enhances EPS growth and capital return, while operational flexibility and prudent cash deployment bolster future earnings and margin resilience.

Revvity Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Revvity's revenue will grow by 5.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.0% today to 18.3% in 3 years time.
• Analysts expect earnings to reach $599.9 million (and earnings per share of $5.47) by about September 2028, up from $278.7 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $356 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 24.4x on those 2028 earnings, down from 35.4x today. This future PE is lower than the current PE for the US Life Sciences industry at 29.3x.
• Analysts expect the number of shares outstanding to decline by 4.63% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.88%, as per the Simply Wall St company report.

Revvity Future Earnings Per Share Growth

Risks

• Accelerating regulatory and reimbursement changes in China, such as the DRG debundling policy, are causing high-margin multiplex diagnostics test volumes to decline and could further erode revenue and operating margins, especially given China represents a meaningful market segment for Revvity's Diagnostics business.
  
• Persistent weakness in academic and government end-markets due to funding pressures (e.g., uncertainties around NIH budgets and public sector spend) is limiting organic growth and exposing Revvity to ongoing revenue volatility and dampened long-term topline outlook.
  
• Global cost-containment policies in healthcare (e.g., DRG, Sunshine Act, VBP in China), alongside increased focus on reducing diagnostic spending, may lead to sustained pricing and volume pressures, especially in legacy multiplex and certain diagnostics segments, negatively impacting recurring revenue streams and net margins.
  
• Intensifying tariff risks and evolving cross-border trade dynamics between the US, EU, and China create recurring operational complexity and cost pressures that may require restructuring of Revvity's supply chain and manufacturing footprint, posing threats to gross margins and increasing execution risk.
  
• The company's reliance on structural cost actions, share buybacks, and the absence of compelling acquisition targets may provide short-term EPS support, but could limit strategic investment in growth initiatives and innovation, ultimately constraining long-term earnings expansion and competitive positioning against larger, better-capitalized peers.

Valuation

• The analysts have a consensus price target of $116.812 for Revvity based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $162.0, and the most bearish reporting a price target of just $100.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.3 billion, earnings will come to $599.9 million, and it would be trading on a PE ratio of 24.4x, assuming you use a discount rate of 7.9%.
• Given the current share price of $85.04, the analyst price target of $116.81 is 27.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.