S&P/ASX 200 Index (ASX: XJO) stock James Hardie Industries PLC (ASX: JHX) has been catching headwinds on two fronts recently.
First, the building materials company has been battered alongside most other ASX 200 stocks amid a looming global trade war sparked by US President Donald Trump's historic tariffs.
Second, many investors appear less than pleased with James Hardie's acquisition of US decking and exterior building products manufacturer Azek.
That acquisition was announced on 24 March.
The deal is valued at US$8.75 billion (AU$14.6 billion), which includes Azek's net debt. James Hardie will fund the acquisition with a combination of cash (47%) and new share issues (53%).
In late afternoon trade on Wednesday, shares in the ASX 200 stock are down 2.8%, changing hands for $32.73 apiece. That sees James Hardie commanding a market cap of $14.1 billion.
But the combination of Trump's tariffs and doubts over the Azek acquisition have seen James Hardie's shares slump 17.6% since 24 March. Shares are now down 44% since this time last year.
And that retrace, according to Bell Potter Securities' Christopher Watt, offers an "attractive entry point" (courtesy of The Bull).
ASX 200 stock with a 'long-term growth story'
"James Hardie has taken a bold step in acquiring Azek, a US outdoor products maker, in a bid to strengthen its foothold in the building materials space," said Watt, who has a buy recommendation on the ASX 200 stock.
"While the acquisition comes at a premium, management is targeting significant synergies of US$350 million, mostly through commercial opportunities," he said, which is the first reason to consider buying James Hardie shares at a discount today.
According to Watt:
Although some analysts express caution about the size and timing of the benefits, the recent share price pullback offers an attractive entry point into a high-quality, long-term growth story.
As for the second reason the ASX 200 stock could be poised to rebound, Watt said, "Despite short term earnings per share dilution, James Hardie remains well positioned, with improving operational leverage and exposure to robust US housing and renovation trends."
And despite some more difficult market conditions over the past months, Watt noted that James Hardie continues to generate strong free cash flows.
"The business continues to demonstrate strong return metrics and free cash flow generation," he said.
James Hardie on track to meet full-year guidance
James Hardie released its Q3 FY 2025 results on 19 February.
While earnings and sales both slipped year on year, pleasingly, the ASX 200 stock reported that it was on track to meet full-year guidance.
Commenting on the company's outlook on the day, James Hardie CFO Rachel Wilson said:
Despite challenging end markets and raw material headwinds, we remain well-positioned to deliver volumes within our original guidance range.
Our Hardie Operating System initiatives, together with efforts to rationalize and prioritize expenses have helped mitigate uncontrollable headwinds to margins.
We delivered a solid third quarter, which gives us increased confidence in reiterating both our second half and full fiscal year guidance across each of our operating metrics.
