The Lynas Rare Earths Limited (ASX:LYC) Analysts Have Been Trimming Their Sales Forecasts

The analysts covering Lynas Rare Earths Limited (ASX:LYC) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the current consensus, from the 13 analysts covering Lynas Rare Earths, is for revenues of AU$690m in 2024, which would reflect a measurable 6.7% reduction in Lynas Rare Earths' sales over the past 12 months. Statutory earnings per share are supposed to sink 14% to AU$0.29 in the same period. Prior to this update, the analysts had been forecasting revenues of AU$787m and earnings per share (EPS) of AU$0.28 in 2024. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.

Check out our latest analysis for Lynas Rare Earths

The consensus has reconfirmed its price target of AU$8.97, showing that the analysts don't expect weaker sales expectationsthis year to have a material impact on Lynas Rare Earths' market 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. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 6.7% by the end of 2024. This indicates a significant reduction from annual growth of 24% 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 2.6% 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 most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Lynas Rare Earths' revenues are expected to grow slower than the wider market. Given the stark change in sentiment, we'd understand if investors became more cautious on Lynas Rare Earths after today.

As you can see, the analysts clearly aren't bullish, and there might be good reason for that. We've identified some potential issues with Lynas Rare Earths' financials, such as concerns around earnings quality. Learn more, and discover the 1 other flag we've identified, for free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

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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.