How Much Earnings Growth Can Roche Deliver?
Roche (NASDAQ:RHHBY) will release its Q4 and full-year 2019 results on Thursday, January 30, and it will likely deliver 6% earnings growth for the full year, according to our estimates. For the full year 2019, Trefis estimates that the company will report:
- Revenues of $63.9 billion, reflecting 5.2% y-o-y growth, primarily driven by the company’s relatively new drugs, including Ocrevus, Tecentriq, and Perjeta, among others.
- EPS figure will likely grow to $2.46 on an adjusted basis, primarily due to higher revenues.
We believe that the company’s full-year 2019 earnings will likely result in a slight positive movement in its stock price. Our forecast indicates that Roche’s valuation is $43 per share, which is slightly above the current price of ~$41. Look at our interactive dashboard analysis on Roche’s Pre-Earnings for more details.
(1) Revenues Expected To Grow In Mid-Single-Digits
- Trefis estimates Roche’s 2019 revenues to be $63.9 billion, reflecting 5.2% growth over 2018.
Relevant ArticlesOncology $30.1 Bil (47%)
In-Vitro Diagnostics $13.9 Bil (22%)
Immunology $8.7 Bil (13%)
Neuroscience $8.1 Bil (13%)
Ophthalmology $1.9 Bil (3%)
Infectious $1.1 Bil (2%)
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TOTAL $63.9 Bil
- Total revenues have increased at an average annual rate of 5.0% from $52.5 billion in 2015 to $60.7 billion in 2018, primarily driven by the company’s oncology segment. It is expected to see a 5.2% growth in 2019, primarily led by its relatively new drugs.
- See Roche Revenues – How Does Roche Make Money? We provide an interactive, in-depth view of the company’s revenues along with our forecasts.
- Key for 2020: Roche’s revenue will likely grow at an average rate of 3.5% over 2019-2020, led by oncology drugs and neuroscience drugs. Also, see how Roche’s new oncology drugs can add $5 billion in sales by 2021.
(2) EPS Likely To Grow 6%
- Roche’s 2019 adjusted earnings per share (EPS) is expected to be $2.46 per Trefis analysis, reflecting 6.4% y-o-y growth.
Total Revenues $63.9 Bil
– Total Expenses $47.0 Bil
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Net Income $16.9 Bil
÷ No. of Shares 6.8 Bil
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EPS $2.46
- As we forecast Roche’s revenues to grow 5.2%, and expenses to grow at 4.8%, this will result in a 30 bps growth in the company’s adjusted net income margin figure from 26.2% in 2018 to 26.5% in 2019, as detailed in the dashboard.
- See Roche Expenses – How Does Roche Spend Its Money? We provide an interactive, in-depth view of the company’s expenses and earnings margins.
- Key for 2020: We believe that revenue will continue to grow in low to mid-single-digits, while expenses could grow at a slightly faster pace, resulting in the net income margin figure to decline to 25.5%. We currently forecast Roche’s 2020 EPS to be $2.41 on an adjusted basis.
(3) Stock Price Estimate ~ 5% Higher Than Market Price
- Trefis’ forecast for Roche’s full-year 2019 earnings of $2.46 and P/E multiple of 17.3x works out to a fair value of $43 for Roche’s stock, which is roughly 5% higher than the current market price of around $41.
- A trailing P/E multiple of 17.3x looks appropriate for Roche’s stock, which is slightly higher than the current implied P/E multiple of 16.7x.
- We use our full cash flow model for Roche to arrive at a P/E multiple of 17.3x for a price estimate of $43.
- Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year.
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