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Earnings Beat: Reece Limited Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Reece Limited (ASX:REH) just released its half-yearly report and things are looking bullish. Reece beat earnings, with revenues hitting AU$4.5b, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 20%. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

See our latest analysis for Reece

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earnings-and-revenue-growth

Following last week's earnings report, Reece's eleven analysts are forecasting 2024 revenues to be AU$8.91b, approximately in line with the last 12 months. Statutory earnings per share are expected to decrease 5.5% to AU$0.62 in the same period. In the lead-up to this report, the analysts had been modelling revenues of AU$8.74b and earnings per share (EPS) of AU$0.55 in 2024. So it seems there's been a definite increase in optimism about Reece's future following the latest results, with a solid gain to the earnings per share forecasts in particular.

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It will come as no surprise to learn that the analysts have increased their price target for Reece 17% to AU$17.97on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic Reece analyst has a price target of AU$23.95 per share, while the most pessimistic values it at AU$13.50. 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.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Reece's past performance and to peers in the same industry. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 0.8% by the end of 2024. This indicates a significant reduction from annual growth of 13% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.1% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Reece is expected to lag the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Reece's earnings potential next year. Fortunately, they also upgraded their revenue estimates, although our data indicates it is expected to perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Reece going out to 2026, and you can see them free on our platform here.

It might also be worth considering whether Reece's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.