It isn't only the big banks and the AMP Limited (ASX: AMP) share price that's enjoying a huge relief rally today.
The James Hardie Industries plc (ASX: JHX) share price has also enjoyed a big bounce after the US-exposed building materials company posted its quarterly earnings update.
The JHX share price surged 7.3% to a 2019 high of $16.23 in lunchtime trade when the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index is up 2.4% as large financial stocks bounced after the release of the Banking Royal Commission's final report yesterday.
The gains made by James Hardie are impressive but lagged those made by the IOOF Holdings Limited (ASX: IFL) share price, AMP share price and Westpac Banking Corp (ASX: WBC) share price.
Why James Hardie is rallying
But shareholders won't be complaining as James Hardie's latest quarterly results and FY19 guidance have assuaged concerns of a sharp and painful slowdown in the US home construction market.
There were concerns that James Hardie would deliver an earnings shock after its peer Boral Limited (ASX: BLD) issued a profit warning yesterday due to bad weather and project delays.
The US home building market has also slowed markedly in recent months and that has been weighing on the share prices of both stocks.
James Hardie posted an adjusted net operating profit of US$65.9 million for the December quarter, which represents a 10% drop to the same time last year.
However, its operating profit for the nine months of its financial year jumped 8% over the previous corresponding period (pcp), while group net sales of US$586.2 million for the quarter and US$1.88 billion for the nine months represented an 18% and 23% pcp increase, respectively.
Outlook
What's more, management expects full year adjusted net operating profit to range between US$295 million and US$315 million. This is a big relief to investors as it largely matches up to consensus forecasts of US$297 million and US$311 million.
"We expect to see modest growth in the US housing market to continue through the remainder of fiscal year 2019," said James Hardie's chief executive Jack Truong.
"The single-family new construction market and repair and remodel market growth rates in fiscal year 2019 are expected to grow, albeit at a growth rate lower than that in fiscal year 2018. The Company expects new construction starts between approximately 1.2 million and 1.3 million."
Foolish takeaway
I think James Hardie looks attractively priced on a one-year forward price-earnings multiple of around 20 times, which is at the bottom end of its five-year average range.
It also gives investors leverage to the rising US dollar. I believe the Australian dollar will be on a back foot for 2019 given that our reserve bank is under pressure to cut interest rates due to the ongoing housing slump.
