There's been a notable change in appetite for Reece Limited (ASX:REH) shares in the week since its interim report, with the stock down 17% to AU$18.20. Results look mixed - while revenue fell marginally short of analyst estimates at AU$4.4b, statutory earnings were in line with expectations, at AU$0.65 per share. 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 gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Reece ASX:REH Earnings and Revenue Growth February 25th 2025

Taking into account the latest results, Reece's twelve analysts currently expect revenues in 2025 to be AU$8.93b, approximately in line with the last 12 months. Statutory earnings per share are expected to dip 5.0% to AU$0.55 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of AU$9.00b and earnings per share (EPS) of AU$0.61 in 2025. The analysts seem to have become a little more negative on the business after the latest results, given the minor downgrade to their earnings per share numbers for next year.

It might be a surprise to learn that the consensus price target fell 11% to AU$18.91, with the analysts clearly linking lower forecast earnings to the performance of the stock price. 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. Currently, the most bullish analyst values Reece at AU$25.15 per share, while the most bearish prices it at AU$13.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

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 0.9% by the end of 2025. This indicates a significant reduction from annual growth of 11% 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 5.3% annually for the foreseeable future. It's pretty clear that Reece's revenues are expected to perform substantially worse than the wider industry.

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The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Reece's future valuation.

With that in mind, we wouldn't be too quick to come to a conclusion on Reece. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Reece going out to 2027, and you can see them free on our platform here..

Don't forget that there may still be risks. For instance, we've identified  1 warning sign for Reece that you should be aware of.

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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.

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