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On Friday, Citi research firm reiterated a Buy rating on Daiichi Sankyo Company, Limited (4568:JP) (OTC: DSNKY), maintaining a price target of JPY6,600.00. The reiteration follows Daiichi Sankyo’s report of robust fourth-quarter results, which saw a significant year-over-year (YoY) increase in revenue by 21% and an operating profit (OP) surge to JPY 83.6 billion, a figure notably higher than the consensus estimate of JPY 34 billion and Citi’s own forecast of JPY 40.5 billion. According to InvestingPro data, the company maintains strong financial health with a 76.3% gross profit margin and an impressive current ratio of 2.77, indicating robust operational efficiency and liquidity.
The substantial outperformance in the fourth quarter has been attributed to several factors, including the European approval milestones for the company’s drug Enhertu, overall improvements in the cost of goods sold (CoGS), and R&D expenditures that came in under budget. Looking ahead, Daiichi Sankyo has set a guidance for its core operating profit for the fiscal year ending March 2026 (FY3/26) at JPY 350 billion, a 12% increase YoY. This forecast surpasses the company’s medium-term plan (MTP) target of JPY 310 billion and the market consensus of JPY 320 billion.
In addition to the favorable earnings guidance, Daiichi Sankyo announced shareholder-friendly measures including a 30% dividend per share (DPS) increase and a JPY 200 billion stock buyback program. These initiatives are part of the company’s strategy to enhance its Degree of Excellence (DoE) and provide robust investor returns. InvestingPro reveals several positive indicators, including the company’s 20-year streak of maintaining dividend payments and management’s aggressive share buyback strategy. InvestingPro subscribers have access to 6 additional key insights about Daiichi Sankyo’s financial strength and market position.
The lower-than-expected R&D budget for the upcoming fiscal year is partly due to the strength of the Japanese yen, delays in the development of HER3 treatments, and more efficient investment strategies. Citi analysts also noted that they view the sales forecast for Enhertu as conservative and believe there is potential for upside. Daiichi Sankyo is also planning to conduct an ASCO highlight call on the early morning of June 3, which may provide further insights into the company’s progress and outlook.
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