Sims Shares Hit Decades High on Big Earnings Upgrade: The Details

Sims shares (ASX:SGM) gapped up at the open today, hitting to their highest level in almost two decades after the company lifted full-year earnings guidance by 17%.

The Sims share price opened at A$31.81 for it’s highest mark since 2008, before closing at A$30, up 1.9% on the day but 3.6% below the open. The pullback suggests some profit-taking to test support after a blistering 64% gain year-to-date, even as the guidance upgrade substantially exceeded both prior company forecasts and analyst consensus.

Upgraded Guidance Boosts SGM Bulls

Sims now expects FY26 Underlying EBIT of A$420-435 million, up from previous guidance of A$350-400 million and well above the May consensus estimate of around A$354 million.

At the midpoint, the revision represents a 17% upgrade and puts the company on track to more than double last year’s Underlying EBIT of A$175 million, which itself was a sharp recovery from the A$96 million reported in FY24.

The upgrade was driven by two distinct but complementary forces, as the North American Metal businesses (including the NAM division and SA Recycling) are expected to deliver a significant increase in second-half earnings, supported by continued strength in non-ferrous metal spreads and improved conditions in ferrous scrap markets. Meanwhile, Sims Lifecycle Services, the company’s IT asset disposition and data-centre decommissioning arm, is now forecast to contribute A$170-175 million in Underlying EBIT for FY26, benefiting from what management described as structural growth in the global data-centre ecosystem.

That Lifecycle Services figure is particularly striking, implying the division could account for roughly 40% of group earnings, a dramatic shift for a business that was relatively modest just a few years ago.

The unit has been riding a wave of demand tied to hyperscaler expansion, AI infrastructure build-out, and the accelerating refresh cycles of enterprise IT hardware. Data-centre construction pipelines across North America and Asia-Pacific remain robust, with recent industry analysis highlighting the metals-intensive nature of new facilities and the corresponding decommissioning opportunities as older equipment is retired.

Not all markets are firing equally, however. Sims noted that ANZ ferrous market conditions remain subdued due to ongoing elevated Chinese steel exports, despite some recent improvement in Asian ferrous prices. The comment underscores the persistent headwind from China’s export behaviour, which continues to weigh on regional scrap pricing and demand even as other geographies show signs of recovery.

The Setup

The sharp intraday reversal from the open reflects a market grappling with two competing narratives. On one hand, the magnitude and quality of the upgrade signals genuine operating momentum and validates the company’s strategic pivot toward higher-margin, less cyclical revenue streams via Lifecycle Services. The business is increasingly being framed as a hybrid: part traditional metals recycler, part circular-economy industrial with meaningful exposure to secular technology trends.

On the other hand, the stock’s valuation is now stretched by historical standards. At multi-decade highs and following a 64% year-to-date rally, markets are questioning how much of the good news is already priced in and whether Lifecycle Services earnings are truly structural or partly cyclical, tied to an intense but potentially front-loaded wave of data-centre investment.

The durability of Lifecycle Services earnings is emerging as the central debate among analysts. While the division posted roughly 22% revenue growth in FY25 and is clearly benefiting from strong operating leverage, questions remain about whether current growth rates can be sustained once hyperscaler capex cycles normalise or if equipment reuse and virtualisation trends reduce the volume of physical decommissioning work. The business also remains exposed to execution risk, including the ability to scale operations and maintain margins as competition intensifies in the ITAD and data-centre services markets.

For now, Sims has delivered a material positive surprise that reaffirms its transformation story, but the sharp retreat from the open suggests that after a 64% rally, markets are acutely sensitive to any hint of disappointment. The A$30 level was a psychological barrier that has now fallen, and Sims bulls will be looking to firmly secure it as a support level in the sessions to come.