S&P/ASX 200 Index (ASX: XJO) building stock Fletcher Building Ltd (ASX: FBU) has had a shaky start to the year, despite its share price lifting about 20% into the green so far.
Shares in the $3.34 billion company by market value currently fetch $3.04 apiece, having slipped from highs of about $3.14 over the past week.
Brokers from Macquarie have now weighed in and reckon the company is a sell, set to face headwinds from challenging market conditions.
But as an ASX 200 stock with a long history, is Fletcher Building one to watch? Let's dive in and see.
ASX 200 stock set to slide: Macquarie
Broker consensus on Fletcher Building has been cautious, with some analysts adjusting their expectations following a string of disappointing results.
Macquarie, for instance, revised its outlook for Fletcher Building in a note to clients this week, projecting a significant decline in the company's stock value.
The broker forecasts a sharp drop in the stock price over the next 12 months, valuing the ASX 200 building stock at $1.85 apiece, down from $1.95 previously.
This is around 40% downside at the time of writing, nearly half of the company's market value.
The key factor influencing Macquarie's pessimism? A persistent decline in market volumes, and "no significant improvement in market conditions", particularly in Australia and New Zealand. Fletcher's "divisional restructuring", announced this week, also plays a part.
Businesses operating in the commercial and infrastructure segments continue to face reduced or deferred spending, partly due to recent weather events and reduced sub-division activity.
Meanwhile, residential property sales also remain at subdued levels, reflecting lower levels of liquidity across the market" (prior guidance was 175 unit sales from 1HFY25; Macquarie +146, now +136). FBU had indicated previously that 40% of its EBIT is typically derived in May-Jun, largely due to spec Residential sales recognition and Dist division rebate accounting.
This view sees the broker lowering its estimates for the ASX 200 stock's profits by an average of 4-5% over the next three years, rating it to "underperform, given predominantly negative catalysts".
What's next for Fletcher Building?
Macquarie isn't the only broker bearish on the ASX 200 stock.
Goldman Sachs placed a sell rating on the stock at the end of April, valuing it at $2.85 apiece. It, too, commented on the series of earnings downgrades and market volumes declining by 10-11% in the first half of FY25.
It does not "forecast an immediate recovery in volumes", thanks to macroeconomic factors like interest rates, and "heightened competition" for the company.
Only time will tell whether the ASX 200 stock can overcome these headwinds, but for now, sentiment is flat. According to Commsec, the consensus of analyst estimates rates it a hold.
Foolish takeaway
Macquarie expects this ASX 200 stock to underperform in the next 12 months and just downgraded its price target even further.
This is despite a decent run for Fletcher shares, which are up more than 16% in the past year.
As to where to from here, I'd say to keep a close eye on this name for the coming months, noting any surprises in its earnings announcements.
