Global markets were generally in negative territory on Friday, with Wall Street marginally lower as investors worried about the future of promised corporate tax cuts following duelling plans unveiled by Republican lawmakers. Last week was the first week since early September in which the US markets did not make gains.
Stock in Focus: James Hardie (JHX:AX)
As we touched on briefly on Friday, shares in James Hardie jumped +7% as analysts and investors were cheered by signs of improvement in the building materials firm's underlying performance for the first half of its financial year.
The move came despite JHX booking a -14% drop in first half-net profit, as ongoing manufacturing inefficiencies and higher productions costs weighed on margins. It was seen as a solid result overall, with some commentators pointing to better than expected pricing growth, as well as a lift in margins in the US business.
Interestingly, JHX also said it expects to be ready for a rapid expansion in Europe in the next 12 months. The company currently generates 76% of its sales in north America and much of the remainder in Australia, New Zealand and the Philippines. The market also liked CEO Louis Gries's comments around the recently announced $US549 million acquisition of German-based Fermacell, Europe's biggest maker of fibre gypsum boards. The purchase gave James Hardie the regional "capability and regional influence that will be important to launch a much higher-growth fibre cement strategy in Europe," Mr Gries said.
We have held a positive view on JHX given its exposure to the US housing market recovery, and as a play on a weakening Australian dollar (strengthening US dollar).
We are currently BUY rated on JHX.
Members should look out for a full update on JHX to be released in our next weekly report.
Australia & New Zealand Market Movers
The Australian share market retraced on Friday (ASX 200 index -0.33%) after losses concentrated in mining and energy stocks ended the market's run of recent gains. In stock news, international media group News Corp swung to a first-quarter profit of $US68 million ($A95 million), boosted by the acquisition in Australia of Sky News and an increase in Australian newspaper digital subscribers.
The New Zealand market sold off on Friday (NZX 50 index -0.58%) led lower by Air New Zealand and Xero, while Heartland Bank hit a record high. Xero, which has made impressive gains of late, was the worst performer on the index after it announced it will de-list from the NZX in favour of the ASX, and has shed -7.2% since then. Another market darling, A2 Milk, continues to move lower and is now down about -15% from its peak on the back of profit taking.
3 Things Markets Will be Watching this Week
- We move into the last US corporate profit announcements, with the level of the market making the current earnings season as important as ever.
- US Politics, with Tax Reform taking centre stage.
- Australian employment data is released on Thursday.
Have a Great Day,
Team