James Hardie Industries plc (ASX: JHX) shares are having a strong session on Thursday.
At the time of writing, the ASX 100 stock is up 6% to $28.55.
But if you thought the gains were over, think again!
That's because the team at Macquarie believes this could be the start of even greater gains for this building materials company's shares.
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What is the broker saying?
Macquarie notes that James Hardie released its second quarter update earlier this week and delivered a profit result ahead of expectations. It said:
While EBITDA was preguided and JHX printed at the upper end of the range (US$326-331m) at ~US$330m, NPAT beat the Visible Alpha (VA) consensus expectations by ~7%. D&A and tax outcomes were guided lower at the recent update, which does not seem to be fully reflected in consensus and could add some EPS momentum support.
The good news doesn't stop there. Macquarie points out that the ASX 100 stock has upgraded its earnings guidance for FY 2026. Importantly, the guidance upgrade is larger than its earnings beat for the second quarter. It adds:
The FY26 outlook upgrade (to EBITDA of US$1.2-1.25bn) well exceeded the 2Q FY26 outperformance of the August guidance, helped by a relatively rapid channel destock, and, we believe, equilibrium in the new construction market is close too. Market conditions remain weighed by uncertainty, but we believe JHX's August downgrade has encapsulated this risk well, seemingly.
Should you buy this ASX 100 stock?
According to the note, Macquarie thinks that now could be a great time to buy James Hardie shares.
In response to its update, the broker has retained its outperform rating and lifted its price target to $41.70. Based on its current share price, this implies potential upside of 46% for investors between now and this time next year.
Commenting on its outperform recommendation, the team at Macquarie said:
Outperform. Market conditions are tough, but stabilising – inventory concerns are fading. Focus now turns to rates and housing policy. An evolving AZEK integration story, a bottoming of markets, and valuation are in support of our thesis. Governance changes also seen as additive.
Valuation: We increase our 50/50 DCF/SOTP-based TP to $41.70 (from $40.60), reflecting earnings changes and a reduction of NAM multiples by 1x as EPS expectations recover. Our TP implies an EV/EBIT of 16.8x (versus a ten-year average of 16x). Catalysts: US Treasury rate developments, housing policy adjustments.
