Shares in James Hardie Industries(NYSE: JHX) declined 15.1% in the week through Friday morning. The negative result came when the fiber cement siding and fiber gypsum company reported disappointing fourth-quarter earnings.
A value opportunity?
The move is particularly notable because it contrasts the stock price move of its engineered wood siding and oriented strand board (OSB) rival Louisana-Pacific(NYSE: LPX).
The difference in performance is from Louisana-Pacific easily beating the first-quarter 2024 guidance management gave in February and significantly raising its full-year 2024 guidance. In contrast, James Hardie's fourth-quarter revenue and earnings were merely within guidance ranges, and its outlook for 2025 implies weakening sales trends.
For example, Louisiana-Pacific's outlook calls for its siding net sales to increase 11%- 13% in 2024, while James Hardie's earnings release states that we "expect our addressable market to decrease 2%, with a range of down 6% to up 3%." That's disappointing because back in February, management had said, "Expect our addressable market to be between a decrease of 4% and growth of 6% in calendar year 2024."
In other words, the midpoint of James Hardie's new guidance calls for a 2% decrease in its end markets in 2024, compared to a previous estimate of a 1% decline.
Image source: Getty Images.
A stock to buy
The revised market outlook has reset expectations, making the stock interesting as a potential play on a housing market recovery. At the same time, it calls into question Louisana-Pacific's outlook, and investors must keep a close eye on both companies. Ultimately, end market prospects for both companies will largely depend on the North American housing market's state, which depends on the interest rate cycle.
Ultimately, buying into either stock implies investing with an awareness that there will likely be volatility along the way as the market debates the timing and magnitude of interest rate cuts.
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Lee Samaha 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.
