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The latest analyst coverage could presage a bad day for Lynas Rare Earths Limited (ASX:LYC), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as the analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
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Following the downgrade, the most recent consensus for Lynas Rare Earths from its 15 analysts is for revenues of AU$558m in 2025 which, if met, would be a meaningful 16% increase on its sales over the past 12 months. Statutory earnings per share are presumed to climb 18% to AU$0.064. Before this latest update, the analysts had been forecasting revenues of AU$626m and earnings per share (EPS) of AU$0.09 in 2025. Indeed, we can see that the analysts are a lot more bearish about Lynas Rare Earths' prospects, administering a measurable cut to revenue estimates and slashing their EPS estimates to boot.
Check out our latest analysis for Lynas Rare Earths
Despite the cuts to forecast earnings, there was no real change to the AU$7.92 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's clear from the latest estimates that Lynas Rare Earths' rate of growth is expected to accelerate meaningfully, with the forecast 34% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 10.0% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.9% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Lynas Rare Earths is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. While analysts did downgrade their revenue estimates, these forecasts still imply revenues will perform better than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Lynas Rare Earths after the downgrade.