Reece Ltd (ASX: REH) shares have been a reliable investment over the past decade.
Despite recent wobbles, during this time, the plumbing parts company has quietly delivered an average total return of approximately 10.2% per annum.
This means that a $10,000 investment back in 2015 would have turned into $26,400 today.
But those returns have been and gone. Is now a good time to buy? Let's see what Macquarie Group Ltd (ASX: MQG) is saying about this ASX 200 stock.
What is Macquarie saying?
Macquarie has been looking at the US construction market this week and its findings make for mixed reading. While optimism is improving, the broker concedes that elevated mortgage rates and trade policy instability are weighing on confidence. It said:
Residential R&R and non-residential confidence returned following a temporary reduction in US tariff rates. Our residential new construction optimism index was unchanged and remains impacted by elevated mortgage rates and declining consumer confidence. Labour availability improved in our survey, showing a continued loosening of the construction labour market, while supply chain disruption concerns eased following temporary tariff relief. Bidding activity and backlogs improved, but remain in contraction (<50pts) in a typically stronger period seasonally. This seems to reflect the cautious spring selling season.
Macquarie also highlights that affordability challenges are proving to be a headwind for industry volumes. It said:
Mortgage rates were broadly flat in May (below 7%) and so was the mortgage rate spread to the treasury yield. Product and labour costs increased in market data (and in our survey). Labour market conditions continue to loosen with construction job openings down 24% YoY in April. While the pause on tariffs is a positive development, negative consumer sentiment and affordability challenges remain a headwind to industry volumes.
Are Reece shares a buy, hold, or sell?
According to the note, the broker is sitting on the fence with Reece shares. It has reaffirmed its neutral rating and $16.40 price target this morning. This is just a touch ahead of where its shares are currently trading.
Instead, Macquarie prefers SGH Ltd (ASX: SGH) shares for exposure to this side of the market. It explains:
SGH offers a solid growth outlook in the medium term and quality exposure to Australia infrastructure, building activity and resources output. Given increased global uncertainties, we find this comparatively attractive at this juncture.
It currently has an outperform rating and $59.25 price target on its shares.
