The Fletcher Building Ltd (ASX: FBU) share price is 1.8% lower at the time of writing on Thursday morning, at $3 a piece. There have been many peaks and troughs over the past 12 months, but the share price is currently sitting 15.19% higher than this time last year.
The dual-listed New Zealand-based building and materials company's shares are also 0.29% lower on the NZE this morning, at NZ$3.45 per share.
The company reported ongoing declines in trading volumes for the first quarter of FY26 and expects challenging conditions to continue for the remainder of the period. While the results were weak, Fletcher Building said it has launched a new cost-out and efficiency programme, targeting around NZ$100 million in annualised savings.
But the team at Macquarie Group Ltd (ASX: MQG) has an underperform rating on this ASX 200 stock. And they expect there could be a significant share price fall in the near future.
Heavy downside ahead for Fletcher Building
In a note to investors this morning, Macquarie confirmed its underperform rating on Fletcher Building shares. However, the broker raised the company's target price to NZ$1.73, up from NZ$1.59 previously.
Despite the increase, using the NZ$3.45 share price at the time of writing, that still implies potential for a huge 49.9% downside over the next 12 months.
"We raise our TP by 9% to $1.73, from $1.59, on lower RfR rollforward (4.3% or -20bps)… Maintain Underperform given predominantly negative catalysts. Prior FBU research," the broker said in its note.
Strong headwinds in the pipeline for the ASX 200 stock
Macquarie analysts pointed out in the note that NZ residential consents have strengthened over the past three months, up 11% compared to the prior period.
"This runs against our view that house consenting levels are running ~30% above sustainable levels," the broker said.
Macquarie also said that moves by local governments to shift local road and water infrastructure costs back to residential land developers (away from rate payers and taxpayer-funded transfers) may be pulling forward consenting activity.
"In Auckland, development contributions lifted 88% from $24k to $45/k per consented house on avge in greenfield areas. This additional impost falls on resource consents (and related BCs) lodged after 1-Jul-2025. We note that according to the gov't (INZ), Auckland developers have historically paid two-thirds of new infrastructure via DCs."
The broker doesn't think this pull-forward of activity will be confined to Auckland either, given the new 2026 legislation will be NZ-wide from 2027.
"Moreover, legislation to cap council rate increases and council shifts to reflect the government's National Policy Statement on increased intensification (e.g., ACC's PC120) reinforce the objective of moving more infra cost to developers, while at the same time encouraging earlier rather than later development," the broker said.
"Some may point to conventional monetary policy impact on demand, but with increasing unsold inventory levels (11-yr high noted by FBU) and low population growth, we do not share this view."
