Building materials stocks have been smashed — and many investors have tuned out. But here's a contrarian idea. James Hardie Industries PLC (ASX: JHX) shares could be one of the ASX's more compelling long-term opportunities.
After a sharp pullback, choppy earnings, and jitters over its major US acquisition, sentiment has turned fragile. Yet it's often at moments like this that high-quality businesses start to look mispriced.
Here are three reasons investors may want to consider James Hardie shares today.
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Competitive MOAT, pricing power
First, it has a genuine competitive moat and pricing power. James Hardie is the global leader in fibre cement siding and trim, with a dominant position in the United States, which generates the bulk of its earnings.
Fibre cement is durable, fire-resistant, and increasingly preferred over vinyl and timber alternatives. That product advantage, combined with brand strength and distribution scale, gives the company meaningful pricing power. Even when housing activity softens, James Hardie has shown it can defend margins by adjusting prices and managing costs.
James Hardie recently announced its quarterly results for the three months to 31 December 2026. In the quarterly results, the ASX 200 share revealed that net sales rose by 30% to $1.24 billion.
Adjusted operating profit (EBITDA) rose 26% to $329.9 million, operating income (operating profit) declined 15% to $176.2 million, and net profit declined 52% to $68.7 million.
More added value per home
The AZEK acquisition opens a much larger growth runway. The purchase of the US outdoor living specialist significantly expands James Hardie's addressable market.
Instead of being primarily a siding company, it is building a broader exterior and outdoor living platform spanning decking, railing, and related products. While the market initially punished the stock on concerns about integration risk and debt, the strategic logic is clear.
The combined group can cross-sell products, deepen relationships with builders, and capture more value per home. If management executes well, the deal could drive earnings growth beyond the normal housing cycle and position the company as a more diversified building products powerhouse.
Attractive valuation
The valuation of James Hardie shares looks far more attractive after the reset. Following a steep decline from previous highs, James Hardie shares are no longer priced for perfection. The ASX share has rebounded this year by almost 15%, but it's still down 30% year to date at the time of writing.
The market has factored in softer housing conditions and integration uncertainty. Yet if US housing activity stabilises over the next couple of years and synergy benefits from AZEK continue to flow, earnings could rebound meaningfully.
In that scenario, today's valuation may prove conservative. Investors are effectively buying a high-quality operator at a cyclical discount rather than at peak optimism.
Of course, risks remain. Housing markets can be volatile, interest rates influence construction activity, and large acquisitions always carry execution risk. Governance issues in recent years have also weighed on sentiment.
UBS has a neutral rating on James Hardie shares with a price target of $41. That is a possible plus of 15%, at current levels.
The broker forecasts the business could generate US$606 million of net profit in FY26, US$698 million in FY27, and US$915 million in FY28. And increasing profit is usually a very useful tailwind for sending the share price higher.
