Why James Hardie Industries Stock Is Falling Today

Building products manufacturer James Hardie Industries (JHX -12.39%) seemingly delivered solid results, but investors appear more focused on what the company didn’t say. Shares of James Hardie traded down 12% as of 1:30 p.m. ET Tuesday on tepid growth guidance, as well as the lack of any deal talk.

James Hardie delivers big year-over-year gains

James Hardie makes a range of building products, including fiber cement siding that is more durable than wood alternatives. The company earned $0.41 per share in its fiscal third quarter ending Dec. 31 on revenue of $978.3 million, surpassing Wall Street’s expectations for $0.39 per share in earnings on sales of $960 million.

Adjusted net income was up 39% year over year, sales were up 14%, and operating cash flow through the first nine months of the year is up 73% compared to the same period of fiscal 2023.

“Our last four quarterly results have demonstrated that we are accelerating through this cycle and taking share,” CEO Aaron Erter said in a statement. “We have a superior value proposition that helps our customers grow and be successful.”

Is James Hardie a buy after its stock crashed post-earnings?

Given the strength of the quarter, it is hard to understand investors’ reaction to the stock. It could just be that expectations had gotten ahead of themselves.

Shares of James Hardie were up nearly 35% in the last three months leading up to the earnings announcement, in part thanks to rumors out of the company’s native Australia that private equity might be interested in taking the company private. There was no reference to any deal talk in the earnings discussion, which could have led some deal speculators to take their gains and move on.

And the company’s guidance didn’t fully live up to the hype implied in the dramatic share rise. James Hardie expects fiscal fourth-quarter North American volumes to be in the range of 750 million to 780 million standard feet, or relatively flat compared to the 767 million standard feet of product shipped in the most recent quarter.

It is worth noting that the 767 million standard feet figure came in ahead of guidance, so perhaps James Hardie management is being overly conservative.

This is a well-run company with a desirable product and a stock that has basically gone nowhere over the past three years, as investors have worried about higher interest rates and what they would do to housing demand. If the stock were to fall further from here, it might be a good time for long-term-focused investors to put James Hardie on the radar.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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