The steep sell-off in James Hardie Industries PLC (ASX: JHX) shares continues for a second day today.
Shares in the S&P/ASX 200 Index (ASX: XJO) building materials company closed down a precipitous 27.8% yesterday, ending the day at $32.00.
In early afternoon trade on Thursday, shares are changing hands for $28.36 apiece, down 11.4%.
This sees James Hardie shares down a painful 37.6% since the stock closed on Monday at $45.45.
We'll look at what the team over at Macquarie Group Ltd (ASX: MQG) make of sell-down below.
But first…
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Why are investors bidding down James Hardie shares?
The ASX 200 stock has come under heavy pressure since the release of its first quarter FY 2026 results.
Investors bid down James Hardie shares after the company reported a 9% year-on-year decline in net sales to US$899.9 million.
Operating income of US$138.6 million was down by 41%, while net income of US$62.6 million plunged by 60% compared to the prior corresponding period.
And earnings before interest, taxes, depreciation and amortisation (EBITDA) slumped 21% to US$225.5 million.
James Hardie shares also didn't get any relief from the lower than expected guidance the company provided for the full 2026 financial year. Management forecast FY 2026 adjusted EBITDA will be in the range of US$1.05 billion to US$1.15 billion.
What's Macquarie's price target for the beaten down ASX 200 stock?
With James Hardie shares down 45% since this time last year, is the stock now a screaming bargain or the veritable falling knife?
Having sorted through the quarterly update, Macquarie this morning said the results "were materially below expectations".
The broker was particularly caught off guard by the company's FY 2026 guidance.
Macquarie noted:
The results were weak, but guidance really shocked. A destocking channel and softer markets saw the group guide for EBITDA of US$1.05-1.15bn; we cut EBITDA 23% to $1.12bn.
But Macquarie maintains a bullish outlook for James Hardie shares in the year ahead, with an eye on customer confidence and falling interest rates.
Commenting on what will drive the stock from here, the broker said:
Balance sheet concerns are brought to the fore, but covenant headroom seems sufficient: we see LTM net debt/EBITDA at 3.6x and EBIT interest cover at 3x in FY26. The macro context will come into focus next, and the focus remains on confidence in the first instance and interest rates in the second.
The ASX 200 stock's acquisition of United States-based decking and exterior building products manufacturer Azek, completed 1 July, is also expected to support the company.
Connecting the dots, Macquarie maintained its outperform rating on the stock.
"Market conditions are tough, but we think an evolving AZEK integration story, a slow bottoming of markets, and another material price correction are in support of a reassessment," Macquarie said.
The broker decreased its 12-month price target for James Hardie shares by 21% to $36.90.
That represents a potential upside of more than 30% from current levels.
