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Lynas Rare Earths Limited Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

The half-yearly results for Lynas Rare Earths Limited (ASX:LYC) were released last week, making it a good time to revisit its performance. It looks like a credible result overall - although revenues of AU$235m were what the analysts expected, Lynas Rare Earths surprised by delivering a (statutory) profit of AU$0.042 per share, an impressive 2,010% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Check out our latest analysis for Lynas Rare Earths

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earnings-and-revenue-growth

Taking into account the latest results, the current consensus, from the twelve analysts covering Lynas Rare Earths, is for revenues of AU$580.1m in 2024. This implies a noticeable 4.0% reduction in Lynas Rare Earths' revenue over the past 12 months. Statutory earnings per share are predicted to rise 8.9% to AU$0.23. Before this earnings report, the analysts had been forecasting revenues of AU$605.7m and earnings per share (EPS) of AU$0.20 in 2024. Although the analysts have lowered their revenue forecasts, they've also made a substantial gain in their earnings per share estimates, which implies there's been something of an uptick in sentiment following the latest results.

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The consensus has made no major changes to the price target of AU$7.67, suggesting the forecast improvement in earnings is expected to offset the decline in revenues next year. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Lynas Rare Earths analyst has a price target of AU$10.00 per share, while the most pessimistic values it at AU$6.50. 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.

Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that revenue is expected to reverse, with a forecast 7.8% annualised decline to the end of 2024. That is a notable change from historical growth of 22% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.4% annually for the foreseeable future. It's pretty clear that Lynas Rare Earths' revenues are expected to perform substantially worse than 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 Lynas Rare Earths' earnings potential next year. On the negative side, they also downgraded their revenue estimates, and forecasts imply they will perform worse than the wider industry. Even so, earnings are more important to the intrinsic value of the business. The consensus price target held steady at AU$7.67, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Lynas Rare Earths. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Lynas Rare Earths analysts - going out to 2026, and you can see them free on our platform here.

It is also worth noting that we have found 3 warning signs for Lynas Rare Earths (1 doesn't sit too well with us!) that you need to take into consideration.

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.