Earnings Miss: Dr. Reddy's Laboratories Limited Missed EPS By 17% And Analysts Are Revising Their Forecasts

Last week saw the newest first-quarter earnings release from Dr. Reddy's Laboratories Limited (NSE:DRREDDY), an important milestone in the company's journey to build a stronger business. Revenues were in line with forecasts, at ₹85b, although statutory earnings per share came in 17% below what the analysts expected, at ₹17.02 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

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Taking into account the latest results, the most recent consensus for Dr. Reddy's Laboratories from 37 analysts is for revenues of ₹344.1b in 2026. If met, it would imply a credible 2.9% increase on its revenue over the past 12 months. Statutory earnings per share are forecast to dip 6.3% to ₹63.92 in the same period. Before this earnings report, the analysts had been forecasting revenues of ₹352.9b and earnings per share (EPS) of ₹69.46 in 2026. It's pretty clear that pessimism has reared its head after the latest results, leading to a weaker revenue outlook and a minor downgrade to earnings per share estimates.

See our latest analysis for Dr. Reddy's Laboratories

Despite the cuts to forecast earnings, there was no real change to the ₹1,289 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Dr. Reddy's Laboratories at ₹1,660 per share, while the most bearish prices it at ₹990. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that Dr. Reddy's Laboratories' revenue growth will slow down substantially, with revenues to the end of 2026 expected to display 3.9% growth on an annualised basis. This is compared to a historical growth rate of 13% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 10% annually. Factoring in the forecast slowdown in growth, it seems obvious that Dr. Reddy's Laboratories is also expected to grow slower than other industry participants.

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. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Dr. Reddy's Laboratories. Long-term earnings power is much more important than next year's profits. We have forecasts for Dr. Reddy's Laboratories going out to 2028, and you can see them free on our platform here.

It is also worth noting that we have found 1 warning sign for Dr. Reddy's Laboratories that you need to take into consideration.

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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.