Analysts mixed on Elders after guidance downgrades
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The news: Analysts were mixed on Elders after shares in the agriculture and real estate group collapsed on Monday on news that its first-half trading was "significantly below" expectations, before paring some of those losses on Tuesday.
The numbers: Morgans analysts hiked their blended valuation on Elders from $7.40 per share to $9.00, and upgraded the stock to 'Add', noting the group's currently discounted share price and more positive outlook for FY25.
While Morgans revised down its FY24 EBIT forecast by 17.7% to the mid-point of Elders' guidance, analysts upgraded their FY25 and FY26 EBIT forecasts by 4.0% and 12.3% respectively, with expectations that the company will benefit from a reversal of issues faced in the first quarter of FY24, backwards integration benefits, and strong returns from its key transformational projects.
UBS analysts, however, reduced their 12-month price target from $9.70 to $9.00, noting that "clearly the size of the negative earnings impact to Elders has been a surprise".
They said that the last 18 months have been a "challenging period" for the group, though a recovery in cattle prices alongside a solid 2024 winter crop outlook has driven some optimism for the second half.
The context: On Monday, Elders said it expects underlying EBIT of between $120 million and $140 million for the 2024 financial year. The group's FY23 underlying EBIT was $170.8 million, a 26% drop compared to the previous year.
The news saw the group's share price slashed by 25% in morning trading on Monday. Shares bounced back on Tuesday, as analysts cited an improving outlook for the second half of the year.
The sources: Morgans research, UBS research
