On Tuesday, Truist Securities started coverage on shares of James Hardie Industries (NYSE:JHX), a leading manufacturer of fiber cement siding, with a positive outlook. The firm issued a Buy rating for the stock along with a price target of $45.00.
Truist's analysis highlights the company's strong position in the building products sector, where it enjoys one of the top three margins. Specifically, the firm notes the impressive EBITDA margins of James Hardie's U.S. unit, which stood at 28.6% for FY 2024 and are projected by the company's management to reach 35% in the longer term.
The firm anticipates that James Hardie will benefit from the continued growth of the fiber cement siding market, which is expected to see low double-digit growth rates. This growth includes a significant element of pricing power in addition to volume, setting it apart from the mid-single digit growth rate forecasted for other companies in Truist's coverage.
The potential for James Hardie to expand its market presence is also underscored, with the possibility of a new U.S. listing that could lead to multiple expansion. Truist points to similar moves by other companies, such as Ferguson and CRH (NYSE:CRH) plc, which have experienced substantial valuation improvements following U.S. listings.
Additionally, the firm suggests that the company's recent strategic hires, including a U.S. CEO with public company experience and a U.S. Investor Relations head with a competitive background, signal a shift towards a more proactive and dynamic corporate culture.
Truist also believes that the divestiture of James Hardie's lower-margin European business could further enhance the company's growth and profitability profile, contributing to its positive long-term outlook.
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