Rovi has become the stock market protagonist so far this earnings season. Its accounts in which it admits a moderation of the profit have been accompanied by a revision of the operating income of the whole year, for which it expects a reduction of up to 10% compared to 20% of the previous estimate. It thus mitigates the blow it foresees in a post-pandemic scenario, in which Covid will become a seasonal disease, while its Moderna vaccine manufacturing business is subject to a lot of uncertainty.
However, all these factors have been overshadowed by the announcement of an imminent share buyback plan that went into effect yesterday, the same day as the announcement. The Madrid-based firm plans to amortize around 5% of the capital, a formula to which investors are already accustomed after the plans launched in the last two years and with which it aspires to shore up the price. The titles of the pharmaceutical company were revalued almost 16% until Tuesday, ‘rally’ that now rises to 27% after the jump on Wednesday, when the capital reduction was already in force.
“The results are not good,” says Renta 4 analyst Álvaro Arístegui, who points out that the consensus estimates on Rovi’s accounts were “low”, hence he has beaten forecasts. In this regard, Arístegui values the launch of this type of program as a way to boost titles, although it only makes sense when they are cheap. Discounting the distribution of dividends, Rovi has managed to approach 46 euros after its vertical climb with which it jumps directly to annual highs and touches an unprecedented barrier since October 2022.
In any case, it is still far from the 59.9 euros it marked just a year ago and corrects just under 40% from the historical highs of 73.8 euros it marked at the end of 2021, when the pandemic made it one of the favorite values. So the buyback should help stimulate its price. With this plan it is added to a formula that has become fashionable among some members of the Ibex 35 relatively recently and that has among its maximum exponents the banking sector. In addition to more favourable taxation, one of the main advantages of reducing outstanding securities is that it boosts capitalisation.
At the moment, Rovi seems to have achieved it, reducing its potential from almost 50% to below 26%, to 57.81 euros while still placing itself among the favorites of analysts. In addition to being one of the eight securities of the Ibex 35 that does not register any sales advice, the group controlled by the López-Belmonte family through Norbel Inversiones appears as one of the favorites of the index in the eyes of the consensus of ‘Bloomberg’, with more than eight out of ten analysts betting on buying. The latest updates have been in this line with significant revisions such as Bestinver, which has raised its theoretical value from 50 to 54.5 euros.
In the last two years, Rovi has invested more than 123 million in programs of this type. The rebound on Wednesday leads the company to reduce its dividend yield to 2.1% and appear as one of the least generous values of this index in this regard after the payment of 1.29 euros per share, up to a total of 70 million, charged to the accounts of 2022. On the contrary, the other large company in its sector that is listed on the index – Grifols – has the dividend frozen until it meets its debt reduction objectives, making it the only company in the Ibex pharmaceutical sector that currently remunerates shareholders.
