Can RDY sustain its strong EPS momentum into 2026?

**Dr. Reddy's Laboratories (RDY) may face challenges in sustaining its strong EPS momentum into 2026.** Here's why: 1. **Recent Performance**: RDY's EPS for Q3 2025 was $0.20, which is a decrease of 0.41% year-over-year. This decline suggests a weakening trend in the immediate term. |code|Ticker|Name|Date|Diluted EPS YoY|Diluted EPS|market_code| |---|---|---|---|---|---|---| |RDY|RDY.N|Dr. Reddy'S Laboratories|2024 Q4|34.10075980097949|0.940124784|169| |RDY|RDY.N|Dr. Reddy'S Laboratories|2025 Q1|-2.4127448085436125|1.0015600608|169| |RDY|RDY.N|Dr. Reddy'S Laboratories|2025 Q2|-15.946985390994243|0.1796799935|169| |RDY|RDY.N|Dr. Reddy'S Laboratories|2025 Q3|-0.40699782111487437|0.1980128458|169| 2. **Analyst Estimates and Actuals**: While RDY has beaten EPS estimates in recent quarters, the margins are slim, with a difference of only $0.01. This indicates that sustaining such momentum might be difficult, especially if operational costs or market conditions change. 3. **Cash Flow Considerations**: RDY's free cash flow is negative at -$25.7 million, with operating cash flow at $77.38 million and financing cash flow at $6.9 million. The negative free cash flow could limit the company's ability to invest in growth or return capital to shareholders, which are crucial for sustaining EPS momentum. |code|Ticker|Name|Date|Free Cash Flow|Investing Cash Flow|Operating Cash Flow|Financing Cash Flow|market_code| |---|---|---|---|---|---|---|---|---| |RDY|RDY.N|Dr. Reddy'S Laboratories|2024 Q4|1.0895740686532E8|-1.36189104E8|1.382289408E8|-6395488.32|169| |RDY|RDY.N|Dr. Reddy'S Laboratories|2025 Q1|-2.8004382075615E8|-2.4298571904E8|1.0195607808E8|1.1449657968E8|169| |RDY|RDY.N|Dr. Reddy'S Laboratories|2025 Q2|4.0292237491515E8|-2.2768618977E8|1.1122251292E8|1.928127505E8|169| |RDY|RDY.N|Dr. Reddy'S Laboratories|2025 Q3|6.1725454502106E8|-6.379894406E7|7.73816434E7|6896551.3|169| 4. **Sustainability of Dividend**: The sustainability of RDY's dividend is another concern. While the company has a history of paying dividends, the current EPS of $0.20 might not provide a strong foundation for future dividend increases, which could affect investor confidence. 5. **Market Conditions and Competition**: The pharmaceutical industry is highly competitive, and RDY faces market conditions that can impact its profitability. Maintaining EPS momentum will require navigating these conditions effectively and capitalizing on growth opportunities. In conclusion, while RDY has shown resilience in certain aspects of its financial performance, the negative trends in EPS and cash flow, along with the competitive nature of the industry, suggest that sustaining strong EPS momentum into 2026 might be challenging. The company will need to address these issues and capitalize on growth opportunities to maintain its EPS momentum.