James Hardie Industries Plc manufacturers building products for new home construction and remodelling.
JHX only entered the Value Portfolio yesterday and we have received its quarterly profit update this morning. Performance of the business is at record levels coming out of the pandemic, with the three months to March generating a 20% increase in revenue to US$807m and a 44% jump in adjusted net income to US$458m on the previous corresponding period (pcp). Additionally, significant momentum in the business has allowed JHX to guide to adjusted net income for the new year of between US$520m-US$570m which would equate to growth of between 13.5-24.5%. As part of this guidance, it has also increased its EBIT (earnings before interest and tax) margin expectations for each of its divisions over the next three years.
While the update was very positive and paints a picture of a company performing exceptionally well and exposed to significant tailwinds because of fiscal stimulus in its key markets, the stock has rallied significantly over the past six months and has sold off today on the update. Given the recent rally, we expect the outlook statement, while very strong, fell short of some bullish estimates but the fact is that the business is performing very strongly so we’re not too concerned about the reaction today.
