It’s a big week — not only is Treasurer Wayne Swan handing down the budget on Tuesday night, but investors will also get a look at how the building materials sector is tracking.
First up this morning is DuluxGroup (ASX: DLX) which is scheduled to report its interim results. The leading paint manufacturer recent completed the takeover of Alesco. This acquisition has substantially broadened Dulux’s exposure to the new home and renovation market through exposure to Alesco’s operating divisions of garage doors, construction products, cabinets, windows, and kitchen appliances.
Then on Wednesday, building materials and glass manufacturer CSR (ASX: CSR) will hold its full-year results webcast at 10 am. The results come hot on the heels of Boral’s (ASX: BLD) earnings downgrade. CSR’s disastrous glass acquisition continues to lose money for the group, so all eyes will be on what management has to say about this division.
A comparison of these three companies with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) shows that Dulux has significantly outperformed the index, CSR, and Boral over the past 12 months. One factor that could be at play here is the “habit” of spin-offs to outperform. Dulux demergered from Orica (ASX: ORI) in mid-2010 and since mid-2011 its share price has not only produced a stellar result compared to the index but it has also outperformed Orica’s share price by around 80%.
Source: Google Finance
With the market continuing to push higher, company valuations are more and more priced for perfection. This sets companies up for a fall is they fail to deliver. As we have seen in recent weeks, earnings downgrades have led to sharp, company-specific sell-offs.
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