Why is the CSR share price lagging the ASX 200 on Friday?

The building products manufacturer has had a difficult year so far in 2022.

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Key points

  • CSR shares are lagging key benchmarks in Friday's session
  • While there's been no news from CSR today, two brokers have downgraded the stock to neutral from a buy
  • In the last 12 months, the CSR share price has fallen 154% into the red

The CSR Limited (ASX: CSR) share price is trading down today, currently 0.77% lower at $5.13. However, in early trade, it sank as low as $5.01.

Meanwhile, the benchmark S&P/ASX 200 Index (ASX: XJO) is trading 1.3% higher at 7,043 in today’s session.

Brokers weigh in on CSR

While there’s been no market-sensitive updates out of the building products manufacturer today, the company did incur a number of downward revisions to its stock rating.

First, Macquarie analysts led by Peter Steyn sliced the broker’s outlook on CSR to neutral following the release of its FY22 results this week.

It said the company’s growth cycle is “maturing” and that “the macro context is getting harder”, making it difficult for the CSR share price to appreciate.

In a note, the broker said that “[p]roperty is playing a bigger role in the group’s valuation now, but we believe the downside risk on multiples in Building Products is still distinct”.

“[T]he downside risk is focused on macro deterioration as rates rise.”

Macquarie sliced its price target by 11% to $6.05 per share in its downgrade, joining Jefferies, which reduced its target by 16% to $5.90 per share.

Analysts at Jefferies led by Simon Thackray also reduced the broker’s rating from a buy to hold, citing reasons of capital management during COVID-19.

Basically the broker thinks CSR should have been more proactive during the pandemic in its investments, and as such, is playing “[capital expenditure] capex catch up”.

It notes CSR is guiding a capex of $140–$170 million in its FY23 estimates, a trend that Jefferies thinks could continue into FY24.

Still, 75% of analysts covering CSR advocate to buy the stock right now, according to Bloomberg data. The consensus price target from all analysts is $6.35 per share.

CSR share price snapshot

In the last 12 months, the CSR share price has fallen 14% into the red. It has also collapsed 15% this year to date.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. 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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