James Hardie share price in spotlight as it upgrades profit guidance

The James Hardie Industries plc (ASX: JHX) share price is likely to buck the market weakness this morning after it upgraded its guidance.

The S&P/ASX 200 Index (Index:^AXJO) is tipped to fall by more than 1% when the market opens, according to futures pricing.

But the US-exposed building materials group could move in the opposite direction after it lifted its first quarter FY21 guidance (which is the current quarter).

Expanding margins

The group’s North America adjusted earnings before interest and tax (EBIT) margin is now expected to be between 27% and 29% for the three months to June 30. This compares with its previous forecasts of 22% to 27%.

“In North America, housing market activity has steadily improved during the past seven weeks despite the COVID-19 pandemic,” said James Hardie’s chief executive Jack Truong.

“The better than expected underlying housing market during our Q1 FY21 combined with our continued focus on customer engagement to drive market share gains, resulted in volume growth in the second half of the first quarter.”

James Hardie’ guidance

Management also provided guidance for a number of its business units. Volumes at its North America Exteriors division is expected to be flat to 2% ahead of the 1QFY20.

The Australian business is tipped to be flat while its struggling European division will see volumes drop 11% to 14% over the same periods.

James Hardie’s decision to cancel its latest dividend is one factor helping bolster the amount of cash on its balance sheet. Management increased its liquidity guidance to more than US$640 million from its earlier expectation of “greater than US$600 million”.

The group will release its first quarter results on 11 August.

Why the Boral share price could also lift

The James Hardie share price might not be the only one outperforming the market this morning though.

The better than expected rebound in US housing market is also likely to benefit other ASX building products companies with material exposure to that market.

This includes the embattled the Boral Limited (ASX: BLD) share price as its income CEO Zlatko Todorcevski will be looking to restructure the group. Boral’s US business is a thorn in the side of shareholders.

Other ASX stocks in the spotlight

This in turn could lift sentiment towards Seven Group Holdings Ltd (ASX: SVW) after it bought a large stake in Boral.

Another ASX stock that could jump on the James Hardie upgrade today is Reliance Worldwide Corporation Ltd (ASX: RWC).

As previously reported, the US renovation and restoration market is also bouncing back strongly and that could lead to increased demand for the company’s plumbing repair solutions.

More reading

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• 3 long-term ASX 200 shares I’d buy right now
• Top brokers name 3 ASX 200 shares to sell next week

Brendon Lau owns shares of James Hardie Industries plc and Seven Group Holdings Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Reliance Worldwide Limited. The Motley Fool Australia has recommended Reliance Worldwide Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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