Earnings Miss: Reach plc Missed EPS By 51% And Analysts Are Revising Their Forecasts

The investors in Reach plc's (LON:RCH) will be rubbing their hands together with glee today, after the share price leapt 25% to UK£0.74 in the week following its yearly results. It looks like a pretty bad result, all things considered. Although revenues of UK£569m were in line with analyst predictions, statutory earnings fell badly short, missing estimates by 51% to hit UK£0.068 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Reach after the latest results.

Check out our latest analysis for Reach

Taking into account the latest results, the three analysts covering Reach provided consensus estimates of UK£539.5m revenue in 2024, which would reflect a discernible 5.1% decline over the past 12 months. Statutory earnings per share are predicted to surge 157% to UK£0.18. Yet prior to the latest earnings, the analysts had been anticipated revenues of UK£541.2m and earnings per share (EPS) of UK£0.19 in 2024. 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 was broadly unchanged at UK£1.40, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Reach at UK£2.15 per share, while the most bearish prices it at UK£0.70. So we wouldn't be assigning too much credibility to analyst price targets in this case, because there are clearly some widely different views on what kind of performance this business can generate. As a result it might not be a great idea to make decisions based on the consensus price target, which is after all just an average of this wide range of estimates.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would also point out that the forecast 5.1% annualised revenue decline to the end of 2024 is roughly in line with the historical trend, which saw revenues shrink 4.8% annually over the past five years By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 4.2% per year. So while a broad number of companies are forecast to grow, unfortunately Reach is expected to see its revenue affected worse than other companies in the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Reach. 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 held steady at UK£1.40, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Reach going out to 2026, and you can see them free on our platform here..

You still need to take note of risks, for example - Reach has 3 warning signs (and 1 which can't be ignored) we think you should know about.

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.