Reece Shares (ASX:REH) Plunge to 5-Year Low As Earnings Sell-Off Continues

Reece Limited shares (ASX:REH) have plummeted to a five-year low as investors continue to sell off holdings following the release of disappointing FY2025 results. The plumbing parts company is facing headwinds from a softening housing market and increased competition, particularly in the United States.

The stock closed at A$10.89, marking a new five-year low, before seeing a small recovery to $11.02. This represents a further 6% decline on the day and a 22.6% drop since the start of the week. The sustained selling pressure reflects growing investor concern over Reece’s financial performance and future prospects.

Reece’s FY2025 results revealed a 1% decrease in sales revenue to A$8.978 billion and a significant 20% decline in earnings before interest and taxes (EBIT) to A$548 million. Net profit after tax also fell, dropping 24% to A$317 million, falling short of market expectations. The company attributed the underperformance to reduced demand in both Australian and U.S. markets, with the U.S. segment particularly impacted by lower volumes and increased competition amid a slowdown in new residential construction. Despite these challenges, Reece continued to invest in strategic initiatives, including the acquisition of Shadowboxer to enhance its digital capabilities.

In response to the earnings report, Morgans downgraded Reece’s shares to a ‘trim’ rating from ‘hold,’ reducing the price target from A$14.80 to A$11.10. The firm cited concerns about the challenging operating environment, especially in the U.S., and potential downside risks if housing conditions remain weak and competitive pressures intensify. As Morgans noted, “While we continue to view REH as a fundamentally good business with a strong culture and long track record of growth, the operating environment remains tough (particularly in the US) with further downside risk to earnings forecasts if housing conditions remain weak and competitive pressures intensify.” Earlier in the year, Goldman Sachs had also reiterated a ‘sell’ rating on Reece, further compounding the negative sentiment.

The near-term outlook for Reece remains uncertain, with the company facing headwinds from a softening housing market, increased competition, and analyst downgrades. While strategic investments in digital capabilities and market leadership in Australia could provide a foundation for future growth, the company must navigate these challenges to restore investor confidence and improve its financial performance.