Week Ahead | James Hardie

9 February 2022

Global markets were mixed overnight, with US markets (S&P 500 index -0.4%), ending a choppy session down, after finishing last week strongly – capped off by a positive day on Friday following Amazon’s earnings beat.

A more mixed array of earnings results saw varying results across the board, while a stronger than expect non-farm payrolls (US employment data) update saw markets increase the possibility of the Fed raising interest rates by +0.5%, which also saw the US 10-year bond yield rise to 1.92%, rocking the market, partiality tech stocks. Meta (Facebook) shares slumped another -5.1%, extending its losses for 2022 to -33%, while Netflix slipped another -2% over concerns on their strategy to win subscribers. 

So far 56% of S&P 500 companies have posted quarterly earnings, with 77% beating earnings estimates and 76% topping revenue expectations. However, some notable misses by high profile stocks are adding to market volatility. Peloton shares surged nearly 21% on reports that Amazon and Nike are lining up as possible suitors for the interactive fitness equipment maker. We continue to see a large dispersion returns across stocks, and think this theme will continue in 2022 s the market rewards "winners" and punishes "losers". 

European Markets (Stoxx 600 index, +0.7%) after digesting strong US jobs data with most sectors trading higher.  
Locally, Australian & NZ earnings season commences this week, with results of mote from Suncorp, CBA, AMP and Downer EDI.

James Hardie (JHX:ASX)

James Hardie shares jumped +2% yesterday, after delivering a solid third quarter result, which saw sales rise +22% to $US738.6m and adjusted net profit of US$154.1m, up +25%, achieving double digit growth across the value product mix in all three regions.

Management also lifted their 2022 full year net profit guidance range to US$620m to US$630m, an increase of +US$15m from the previous guidance. The strong backlog in new home construction and remodelling activity in the US has given the company the confidence to provide 2023 full year sale guidance of +16-20% growth from the 2022 result.

We remain BUY rated on James Hardie, as it continues to deliver solid growth and benefit from heightened construction activity. However due its current valuation have a high risk caveat as well as the risk of any easing in construction activity. 


Australia & New Zealand Market Movers

The Australian market edged  a touch lower yesterday (ASX200 index, -0.1%) amongst a choppy session.

Energy and Materials were the best performing sectors helping to offset a larger losses. Travel stocks led gains as Australia announced it will reopening its boarders to quarantine free travel for fully vaccinated travellers from 21st February 2022, which support healthy gains across travel stocks Qantas up +4.6%) and Flight Centre  rising +7.8%. 

GrainCorp was the best performer on the day rising +12.3%, after delivering an impressive trading update, which saw Elders rise +5.2%.
Financials were generally weaker led by Magellan Financial after its chief investment officer Hamish Douglas announced he would be leaving. ANZ fell -1.9% after disclosing its quarterly result as stiff competitions saw margins fall to 1.57%, well below expectations.

The New Zealand market (NZX 50 index, -0.5%) fell on Friday, reacting to Meta’s (Facebook) earnings miss, causing local tech stocks to extend losses.

Briscoes led the market higher jumping +5.3%, after its beat its annual profit guidance by $2m. Air NZ was up +1.9%, buoyed by the prospect of easing travel restrictions. 


3 Things Markets will be Watching this Week

  1. US Inflation (CPI) data will be in focus given its importance in regards to its importance for the interest rate track.
  2. US earnings from the likes of Pfizer, Toyota, Coca-Cola, Walt Disney, PepsiCo, L’Oreal, Astra Zeneca, Unilever and Uber.
  3. Locally, Australian & NZ earnings season commences, with results of note from Suncorp, CBA, AMP and Downer EDI. 
Global markets were mixed overnight, with US markets (S&P 500 index -0.4%), ending a choppy session down, after finishing last week strongly - capped off by a positive day on Friday following Amazon’s earnings beat.

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