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Why the James Hardie share price is down 24% over the last 5 months

The James Hardie Industries plc (ASX: JHX) share price has been beaten down 24% in the past five months amidst profit downgrades, housing market concerns and rising input costs. James Hardie is a building materials company with most of its sales coming from the United States.

Cracks began to show in August, when management announced that its full-year earnings guidance for the year ending 31 March 2019 was below analyst forecasts. Management put its expected adjusted net operating profit between US$300 million US$340 million, while analysts’ estimates were between US$313 million and US$358 million.

Investors didn’t take to this kindly, especially since this guidance was based on assumptions that the U.S. housing market would continue to improve and input prices would remain consistent. Given uncertain market conditions, it’s no wonder investors started to hit the sell button.

The next big hit to the James Hardie share price came in November with another profit downgrade by USD$20m. Again, this was based on the assumption that housing conditions in the United States would improve. The share price tumbled further.

Increasing signs of distress in U.S. property markets continue to show. Last month, the NAHB/Wells Fargo Housing Market Index fell to its lowest level since 2015, and mortgage lender Fannie Mae’s home purchase sentiment index hit an almost two-year low. Today, Bloomberg published an article warning of “another lacklustre year for U.S. housing”.

All this has contributed to a very dismal 5-month period for James Hardie.

Motley Fool contributor Cale Kalinowski has no position in any of the 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 Scott Phillips.

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