Reliance, Inc. (NYSE:RS) just released its latest first-quarter report and things are not looking great. Reliance missed analyst forecasts, with revenues of US$3.6b and statutory earnings per share (EPS) of US$5.23, falling short by 2.9% and 5.5% respectively. 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. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Following the recent earnings report, the consensus from six analysts covering Reliance is for revenues of US$14.1b in 2024. This implies a small 2.7% decline in revenue compared to the last 12 months. Statutory earnings per share are expected to decrease 9.6% to US$19.77 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$14.2b and earnings per share (EPS) of US$19.96 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
The analysts reconfirmed their price target of US$355, showing that the business is executing well and in line with expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Reliance analyst has a price target of US$380 per share, while the most pessimistic values it at US$335. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 3.6% by the end of 2024. This indicates a significant reduction from annual growth of 11% 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 4.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Reliance is expected to lag the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. 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 US$355, with the latest estimates not enough to have an impact on their price targets.
With that in mind, we wouldn't be too quick to come to a conclusion on Reliance. Long-term earnings power is much more important than next year's profits. We have forecasts for Reliance going out to 2026, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 2 warning signs for Reliance you should be aware of, and 1 of them is significant.
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