Elders Ltd (ASX: ELD) shares closed 6.31% higher on Monday at $7.41 a piece. Over the past week, the shares have jumped 10.6% and they're now 2.77% higher for the year to date.
The Australian agribusiness company's shares have jumped higher on the back of its latest FY25 earnings result. For the 12 months, Elders reported a 12% increase in underlying EBIT and a 34% rise in underlying net profit after tax. The company also revealed a 2% rise in sales and a margin expansion.
Investors are clearly pleased with the result. And now, analysts at Macquarie Group Ltd (ASX: MQG) have updated investors with their latest stance on the stock.
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Stronger outlook and upside ahead for Elders shares
In a note to investors, the broker raised its recommendation on Elders shares to outperform, from neutral. It also increased its target price on the shares to $8.25, up from $8.22 previously. The latest update follows a period of restriction.
At the time of writing, ahead of the ASX open on Tuesday, the new target price implies a potential 11.3% upside over the next 12 months.
"Earnings changes: FY26 EPS +4% on stronger recovery in AgChem with improvement in seasonal conditions. FY27-29 EPS +3-4% on higher base & lift to our Delta Agri synergy numbers (we assume $16m FY29 exit rate)," the broker said in its note.
"Valuation: We value Elders on SOP basis and derive an $8.25 price target."
"ELD offers combo of cyclical rebound driven growth on seasonal condition improvement and med-term potential with organic expansion prospects (eg geographic & further roll-out of commercial real estate). FCF to improve as move past SysMod transformation program & on maturity of bolt-on acqn strategy," Macquarie said.
What else did Macquarie have to say?
Macquarie analysts said the latest FY25 result was a beat over expectations, driven by lower tax.
The analysts highlighted two standout positives from the results.
The broker is impressed with Elder's optimism around its FY26 outlook. It noted that the first 6 weeks of trading were 30% higher versus the prior corresponding period. This was due to the effects of easing drought conditions in Australia's southern regions.
It also pinpointed the company's focus on return on capital and reducing its on-balance sheet financing of debtors. Macquarie said that, logically, these changes should improve the cash flow profile of the business.
"Over the next 3-5 yrs we think ELD offers good earnings growth potential with cyclical rebound on seasonal condition improvement and with inclusion of Delta + synergies," the broker said in the note.
"$12m synergy target to be driven by backward integration and ELD has signalled accelerated timetable to achieve these (originally 3 yrs from acqn close). Synergy number conservative in our view. Medium term, we think ELD has ample organic growth opportunities with increasing prominence of Real Estate/Fin Services (high ROC businesses)."
