Reece Ltd shares (ASX:REH) have endured a brutal stretch, with its share price down 41% since the start of this year. The shares carved out a fresh 52-week low of A$12.93 today, before staging a modest recovery to close at A$13.28, a 0.61% gain on the day. This question as to whether the A$13 level could act as a genuine support, signalling a potential near-term bottom, or merely a temporary reprieve in a longer-term downtrend warrants a look.
The stock’s recent woes represent a stark reversal of fortune for a company that historically delivered impressive growth. Since its ASX listing in the late 90’s, Reece transformed from a modest enterprise into a market heavyweight, with a current market cap above A$8.5billion. However, the past year has witnessed a significant erosion of this value, largely driven by persistent softness in housing markets across its key operating regions: Australia, New Zealand, and the United States.
The A$13 level is now under intense scrutiny. The stock’s ability to bounce back after briefly breaching this threshold suggests some buying interest exists at these lower valuations. However, whether this constitutes a durable support level remains uncertain. Technical analysts will be closely monitoring trading volume and price action in the coming weeks to determine if this initial bounce has legs. A sustained period of trading above A$13, accompanied by increasing volume, would provide stronger confirmation that a bottom may be forming. Conversely, a failure to hold this level could signal further downside risk.
Adding to the complexity is the downward revision of earnings expectations. UBS recently slashed its FY26 EBIT (earnings before interest and taxes) forecast for Reece by a substantial 19% to A$502 million, implying a 9% year-over-year decline. The outlook for the U.S. market is particularly concerning, with EBIT projected to drop 17% to A$171 million.
The ANZ region is also expected to experience a contraction, with EBIT forecast to fall 4% to A$331 million. These downgrades reflect the challenging operating environment, characterized by lower housing starts, elevated mortgage rates, and intensifying competition in core markets.
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Recent news provides further context. Over the past month, Reece’s share price has fallen by roughly 20%, contributing to a 46.67% decrease over the past year. Analyst sentiment has soured, with price targets lowered by 9.5% to A$16.19. Despite this, an interesting development occurred in March, when insider Ross McEwan purchased 30,000 shares at an average price of A$18.06, totaling A$541,830. This insider buy could be interpreted as a vote of confidence in the company’s long-term prospects, although it’s important to note that this purchase was made significantly above the current trading price.
While Reece shares have demonstrated some resilience today around the A$13 level, the broader outlook remains clouded by fundamental challenges. A sustained recovery will likely require concrete evidence of improving market conditions and a return to earnings growth.
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