Citi Financial recently reduced its price target for Reece, a plumbing and bathroom supplies business, due to their bleak perspective, suggesting a more challenging environment and diminishing pricing power.

The updated price target is now A$14.20, reduced from A$14.30, while the ‘sell’ rating remains unchanged.

Despite Reece reporting an 11% jump in adjusted profit after tax for the fiscal year 23 at A$405 million, Citi revised Earnings Before Interest and Taxes (EBIT) expectations downward by approximately 4% for fiscal years 24 to 25.

Given the current softer outlook and the weakening broader economy, interest seems to impose a significant drag entering FY24.

Factoring in leases, Citi anticipates finance costs of approximately A$100 million in FY24, marking a significant increase from FY23.

Presently, 3 out of 11 analysts assign a ‘hold’ rating to the stock and others rate it as ‘sell’ or lower, placing the median price target at A$14.85, according to data from Refinitiv.

However, Reece shares have seen a 38.5% uptick this year, as of its last closing.

Reece (ASX:REH) is a business specializing in plumbing and bathroom supplies.