Suddenly housing is looking a bit brighter for James Hardie Industries which has upgraded its full-year adjusted net operating profit guidance in the wake of a solid performance in the six months to September 30.
The growing weakness in the US homebuilding market, driven in part by rising mortgage costs as the Fed lifts interest rates, has seen James Hardie haul back on its guidance for the full year triggering a big slump in the share price yesterday.
Further input cost reductions strengthen FY20/21 expectations. Positive end market data and early US reporting commentary leads Credit Suisse to increase North American earnings estimates by 2% for FY20 and 6% for FY21.
The third quarter result were slightly softer than Morgan Stanley expected. Primary demand growth again disappointed, although the broker questions whether there was more of an impact from the weather than management acknowledged.
The US housing market has been weakening for several months but the broker had assumed James Hardie could still grow in a soft market. Now the broker sees this as more difficult as the challenges from lower housing activity make it harder for the company to predict volume growth. Margin expectations have been cut.