James Hardie Industries Down to Sell - Analyst Blog

On Apr 8, Zacks Investment Research downgraded James Hardie Industries plc JHX to a Zacks Rank #4 (Sell) from Zacks Rank #3 (Hold).

Why the Downgrade?

On Feb 28, James Hardie Industries reported adjusted earnings of 10 cents per share, up 67% year over year. The results, however, lagged the Zacks Consensus Estimate of 48 cents. Revenues in the reported quarter increased 10% year over year to $353 million but fell short of the Zacks Consensus Estimate of $394 million.

James Hardie Industries expects full-year earnings, excluding asbestos asset impairment, Australian Securities and Investments Commission (ASIC) expenses, New Zealand product liability and tax adjustments to be $190–$200 million, depending on the housing industry in the U.S. and Australia. Although U.S. housing activities have been improving for some time, market conditions remain somewhat uncertain in the light of recent inclement weather.

Moreover, the company forecasts earnings before interest and tax (EBIT) margin for full-year 2014 to be above 20% in the U.S.A and Europe Fibre Cement segment, led by improvement in both underlying market demand and financial performance. However, uncertainty in the U.S. operating environment will likely weigh on its margin.

Furthermore, operating environment in Australia is expected to improve modestly. In Australia, approvals for detached homes continues to increase. However, the repair and remodel market continues to deteriorate.

Other Stocks to Consider

Some better-ranked stocks in the same sector that warrant a look include Gibraltar Industries, Inc. ROCK, United Rentals, Inc. URI and Nortek Inc. NTK. All of these have a Zacks Rank #2 (Buy).