Morgan Stanley slashes Johns Lyng price target
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The news: Morgan Stanley analysts have slashed their price target on shares in Johns Lyng Group after the building services provider last month missed its revenue guidance.
The numbers: The brokerage cut its 12-month price target on Johns Lyng to $4.40, a 29% reduction from $7.20 previously, but retained its ‘overweight’ rating on the stock. The cut came after the company last month reported a 9.6% drop FY24 revenue, while profit was also much lower than analyst forecasts.
Shares in the company, which lost a third of its value after the results, were trading 1.17% lower at $3.38 in early trading on the ASX.
The context: The analysts noted the main drivers of the FY24 revenue shortfall was underperformance in New South Wales, a slow ramp up across the business, and the impact of benign weather. They have cut earnings per share estimates for FY25 and FY26 by 22% to 24%.
What they said: “We think JLG's long term growth engine remains intact and is cheaper following the recent share price correction — especially with VA consensus expectations reset," the analysts said in a note.
"However the market will remain skeptical near term until JLG can deliver to business as usual guide over FY25."
The source: Morgan Stanley Research
