Tag: ASX:JHX

Regular readers will recall that we’ve had a bearish bias on JHX since it broke the $22.50 level in the early part of May.

At that time, the stock was trading at 27 times earnings on a 2.2% annual yield

A weaker US house construction market combined with a general contraction in US retail sales has kept shares of JHX offered over the last several weeks.

We maintain our downside target of $18.00 per share over the medium-term.

James Hardie

Since trading as high as $23.20 on May 2nd, shares of JHX have dropped over 14% and are now trading below $19.80.

We posted a report on the blog on May 19th pointing out that JHX reported FY17 results which were below market expectations.

Overnight, US New Home Sales fell to 569,000, well short of the consensus expectation of 610,000. As new home construction continues to slide, we sell further downside range extension for JHX.

The new key support level comes in near the February low of $18.20.

James Hardie

JHX reported FY17 results that were below market expectations. EBIT
of US$354m & NPAT of US$249m

At 27x earnings and a 2.6% dividend yield, combined with last week’s deteriorating new home sales data in the US, JHX has been one of our high conviction shorting opportunities.

Chart – JHX

James Hardie  half year (ended 30 September 2016) earnings show net operating profit of US$141m, an increase of 10% on the same time last year. Group Adjusted EBIT for the half US$204 million, also up 10% on last year.

The James Hardie earnings update supports our view that JHX remains well positioned to benefit from the ongoing recovery in US housing construction.

Overnight, US housing Starts data was released. On an annualised basis, October data showed 1.3m in October compared to expectations of 1.1m. Building Permits annualised 1.23 in October compared to expectations for 1.2m

FY17 revenue US$2b, EBITDA US$470m, EPS US$0.60 and DPS $0.44, placing the stock on a forward yield of 3%. We expect EPS growth of 10%+ in to FY17 and FY18.

Our algorithm engines triggered a buy signal earlier this week.

We recently highlighted James Hardie as a buy recommendation and we therefore draw your attention to the upcoming 2Q earnings result scheduled for release on Thursday.

Consensus expectation for FY17 net profit is around US$275m. This will mean JHX is delivering 15%+ EPS growth. It’s likely that a positive earnings trend can be supported by stronger demand for its products from North American consumers.

FY17 revenue $2b,  EBIT $400m, NPAT $275, EPS $0.65, DPS $0.44 places the stock on a forward yield of 3%