Why the CSR Limited share price has been CRUSHED today

The CSR Limited (ASX:CSR) share price is down 11% in early trade. Here's why…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The CSR Limited (ASX: CSR) share price has fallen 11% to $4.60 after the leading manufacturer and supplier of building products posted a full-year profit of $183.8 million for the year ending March 31 2017.

Today's result is an 11% increase in net profit after tax (before significant items) year-on-year and came courtesy of a strong performance from its key Buildings Products segment.

Earnings before interest and tax (EBIT) grew 21% year-on-year in the segment to $202.8 million, thanks to strong demand for residential housing on the east coast of Australia.

Thankfully this strong performance more than offset weakness in all its other segments. The most disappointing was its Aluminium segment. Segment EBIT fell 10.5% to $93.1 million due partly to weaker aluminium prices.

Looking ahead management has painted a mixed picture. While it believes its Aluminium segment will benefit from higher realised prices, its outlook on its Building Products segment is not as positive.

Management advised that it believes segment earnings will only be supported by reasonably steady demand on the east coast for detached housing and high-rise construction.

I interpret this as an expectation for zero growth next year from its biggest segment, which is especially disappointing.

Should you buy the dip?

CSR delivered full-year earnings per share of 36.5 cents, up 11% from 32.9 cents last year. This means that its shares are changing hands at just under 13x earnings after today's decline.

Whilst this does look cheap on paper, it is worth remembering that its shares have a tendency of trading on lower earnings multiples than the market average.

So although it looks like a bit of a bargain, I would suggest investors give CSR a miss until its outlook improves.

In the meantime I think materials sector peers Syrah Resources Ltd (ASX: SYR) and South32 Ltd (ASX: S32) could be worth a closer look.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »