The James Hardie Industries plc (ASX: JHX) share price is outperforming the market this morning after it posted a big jump in profit and sales for the full year to end March 2019.
The JHX share price jumped 1.8% to $18.15 in morning trade even as the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index shed 0.4% after yesterday's big run-up from the shock election results.
James Hardie's peers were mixed with the Boral Limited (ASX: BLD) share price slipping 0.7% to $4.88 while CSR Limited (ASX: CSR) added 0.8% to $3.60 at the time of writing.
Profit, sales and margin growth
The big jump in James Hardie's share price came after management posted a 57% increase in FY19 net operating profit to US$228.8 million ($331.3 million) on the back of a 22% increase in revenue to US$2.51 billion.
It's acquisition of Fermacell in Europe and growth in its North American Fibre Cement business contributed to the growth although US housing market demand for its products remain weak and its operating profit in the final quarter of the year fell 9% compared to the same time last year.
The good news is that conditions in the US is expected to improve in the current financial year with its chief executive Jack Truong forecasting modest growth in the US housing market in FY20.
More growth in FY20 expected
"The single family new construction market and repair and remodel market growth rates in fiscal year 2020 are expected to grow, albeit at a growth rate lower than that in fiscal year 2019. The Company expects new construction starts between approximately 1.2 million and 1.3 million," said Dr Truong.
"We expect our North America Fiber Cement segment EBIT margin to be in the top half of our range of 20% to25% for fiscal year 2020. This expectation is based upon the Company continuing to improve operating performance in our plants, improved net average sales price and mix, continued inflation for input costs and modest underlying housing growth."
There's good news for its lagging European business as well. This division only posted an adjusted earnings before interest and tax (EBIT) margin of 10.6% if the impact from the acquisition was excluded.
However, the company said it expected to deliver year-on-year growth in sales and EBIT margin for the current financial year.
Foolish takeaway
I think the biggest takeaway from the results is the lack of unexpected bad news. While there were some cracks in the group's performance, there's nothing there to spook investors.
James Hardie and Boral had been underperforming the broader market over the past year due to a surprising slowdown in the US residential construction market. There's no V-shape recovery but at least things are slowly improving and that's enough to feel bullish about James Hardie.
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