The James Hardie Industries plc (ASX: JHX) share price dipped today after yesterday’s big run. This may be a good time to be buying as it’s a hot favourite among brokers.

Shares in the building materials group eased 0.5% to $28.49 in the last hour of trade as the stock consolidated its 7% plus surge on Monday after reporting a strong quarterly result.

In my mind, James Hardie stands a head taller than its peers like Boral Limited (ASX: BLD) as it’s a better quality stock in almost every regard.

This can be seen by what brokers are saying about James Hardie following its results. Just about every one of them has come out to reiterate their “buy” recommendation on the stock.

Price target upgrade

Goldman Sachs is impressed with the company’s strong operating performance, particularly in its US business.

The broker lifted its price target by 5.3% on the stock to $34.38 a share and reiterated its “buy” rating on the stock.

Credit Suisse upgraded its 12-month price target on the stock to $30.90 from $27.00 a share as the group’s volumes, margins and sales growth were ahead of expectations.

Management increased its forecast profit margin to between 27% and 29% from 22% to 27%.

The broker thinks that there is limited opportunity for negative surprises in James Hardie’s margin upgrade from “uncontrollable costs”.

Growing stronger for longer

UBS calls James Hardie “a clear standout” and believes the stock still offers value despite its recent outperformance.

“In our view, JHX’s performance through the depths of COVID-19 supports rising long term expectations for volumes [primary demand growth] and margins,” said the broker.

It said in the medium- to long-term, primary demand growth (PDG) will be supported by home owners going ahead with exterior remodelling work once restrictions ease and a return to strong housing activity. The record low interest rate environment and good demand for low dense living are supporting factors.

The broker increased its price target by $3 to $34 a share and it repeated its “buy” call on the stock.

Further upside for the James Hardie share price

JP Morgan is another to reaffirm its “overweight” call on the stock even though it’s yet to adjust its price target of $28.20 a share.

“A key highlight was management’s comment that primary demand growth (PDG) in the US is tracking ‘well ahead of 7%’,” said the broker.

“We’ve yet to factor today’s update into our model but, if we were to increase PDG to 8% and EBIT margins to 27% in the US, our FY21 EPS would move to 83cps, implying a P/E of 23x.”

While a price-earnings (P/E) of 23 times may sound fully valued to some and is inline with the industrials sector, JP Morgan pointed out that James Hardie trades at a 30% premium on average over the past seven years.

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Motley Fool contributor Brendon Lau owns shares of James Hardie Industries plc. The Motley Fool Australia has no position in any of the stocks mentioned. 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.

The post Why James Hardie is a favourite buy among leading brokers appeared first on Motley Fool Australia.

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Australian retail spending rebounded in May, rising a record 16.3% following a 17.8% fall in April. Sales had previously jumped 8.5% in March due to stockpiling and panic buying. The May rise was the largest in the 38 years of collected data. 

Initial figures from the Australian Bureau of Statistics indicates turnover in household goods was 30% higher in May 2020 than May 2019. Household goods retailing has been one of the more resilient sectors during the coronavirus pandemic, falling a mere 0.1% in April. ASX retailers operating in this space have benefitted from consumers spending increased time at home.

Let’s take a look at how these retailers and the overall ASX retail shares are performing. 

Adairs Ltd (ASX: ADH)

The Adairs share price has recovered strongly and is up 362% from its March low. Adairs is an omnichannel home furnishings retailer operating 160 stores in Australia and New Zealand as well as online. The company sells bedroom furniture, manchester, homewares and children’s furnishings. 

Last week Adairs reported that despite the closure of stores during the lockdown period, store sales have increased over the year to date, while online sales have boomed. Physical stores reported 3.5% sales growth for the year to date, despite store closures during lockdown across Australia and New Zealand. Online sales are up by 64% year to date, and 92.6% in 2H FY20 to date (being the 24 weeks to 14 June). 

This brings total like-for-like sales growth to 15.7% for the financial year to date and 27.4% for the second half. Adairs is definitely benefitting from people spending more time at home. Consumers are choosing to upgrade their home furnishings and purchasing things like bed linen, new pillows and decorations. 

Adairs purchased online home and living products retailer Mocka last year. The acquisition created a larger, more diversified business with increased exposure to the online channel. Pleasingly, Mocka also recorded 52.1% sales growth in the second half to date, with 100% of sales online. 

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster is Australia’s largest e-commerce company in the furniture and homewares market. The retailer has benefited both from the move towards online shopping and consumer efforts to upgrade living spaces. 

The company has continued to trade strongly in the second half with revenue growing by 90% compared to the prior corresponding period. The result was driven by strong growth in April and May as customers turned to online to fulfil furniture and homewares needs. This trend has continued in June with revenue tracking at +100% on the prior corresponding period. 

In FY20 (to 31 May) Temple & Webster has seen year to date revenue increase 68% to $151.7 million. EBITDA is up 668% to $7.1 million, while active customer numbers have increased 68% to 440,257. The company is cash-flow positive and has a capital-light business model with a debt-free balance sheet. 

Temple & Webster is well placed to take advantage of the structural shift to online in the furniture and homewares market. CEO and Co-Founder Mark Coulter said: “We remain bullish about the longer-term shift from offline to online driven by changing consumer preferences and demographics. Customers are experiencing the benefits of our channel, including range, convenience, and value.” 

Nick Scali Limited (ASX: NCK)

The Nick Scali share price is up nearly 130% from its March low, having surged strongly last week on the back of its latest sales figures. Prior to the pandemic, the furniture retailer sold predominantly through physical stores, importing some 5,000 containers of furniture per year. 

As a result of the pandemic, Nick Scali has enhanced its digital offering, allowing customers to purchase its entire range of products online. The retailer closed showrooms on 30 March 2020 and began reopening in April, with all stores open by the end of the month. Since reopening, all showrooms have traded strongly with positive sales order growth. 

Customer activity rebounded significantly in May and the first half of June. Sales orders over May and June are expected to be up 54% on the prior corresponding period. This surge has been driven by the easing of restrictions and consumer spending toward furnishings and homewares. 

Nick Scali has benefitted from people spending more time at home. As a result, consumers are choosing to upgrade their domestic environments with new furniture and accessories. Given the current increase in sales orders, Nick Scali expects sales growth of 30% in Q1 FY21 which will underwrite profit growth for 1H FY21. 

Nick Scali has forecast strong profit growth in the second half. It predicts net profit after tax (NPAT) to be up 15% to 20% on 2H FY19. Full-year revenue is expected to be in the range of $260 million to $263 million. The retailer is expecting full-year underlying NPAT of $39 million to $40 million. 

Kogan.com Ltd (ASX: KGN)

Kogan has been one of the strongest retail performers over the pandemic. The Kogan share price has gone from strength to strength, increasing 261% from its March low and surpassing previous highs. In April and May Kogan’s gross sales increased 103% year on year. This drove a 132.9% increase in gross profit across the period. 

Kogan added 126,00 active customers in May, growing active customer numbers to 2,074,000 at the end of the month. Adjusted EBITDA grew by 219.3% across April and May, with financial year to date adjusted EBITDA up by more than 50%. The company had cash of $58.6 million at the end of May with its debt facility drawn to $26 million. 

Earlier this month Kogan launched a $100 million capital raising at an offer price of $11.45 per share. Funds will be used to increase financial flexibility, giving the ability to act quickly on accretive opportunities, expand the customer base, and enhance the operating model. Of course, Kogan is not just an online retailer – it also offers services including insurance, internet, mobile, and energy. 

Alongside the above ASX retail shares, Kogan has benefitted from a spike in sales due to lockdowns while many bricks and mortar stores were forced to close. The long-term shift to digital which has been accelerated by current events is also in the retailer’s favour. 

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia has recommended Temple & Webster Group Ltd. 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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Investors remain on edge with the S&P/ASX 200 Index (Index:^AXJO) bouncing between gains and losses on conflicting reports of a new US-China trade war.

Those looking to buy any dips in the market may find the following stocks enticing. These are the latest ASX shares leading brokers are recommending investors buy today.

Better than expected

One to watch is the SEEK Limited (ASX: SEK) with Credit Suisse reiterating its “outperform” recommendation on the stock following its profit update.

The online jobs classifieds group provided earnings guidance that was a little ahead of what the broker was expecting.

SEEK is expecting to post revenue of around $1.58 billion and earnings before interest, tax, depreciation and amortisation (EBITDA) of about $410 million in FY20. Credit Suisse had pencilled in $1.55 billion and $405 million, respectively.

“Divisionally, Zhaopin, ANZ and Seek Asia have continued to see a recovery with Zhaopin May billings only down 10% y/y and lower costs mitigating the earnings impact,” said the broker.

Management also managed to increase its debt covenants, which is reassuring to investors that the group won’t run into trouble with its lenders.

On the downside, SEEK’s Latin America operations are more heavily impacted by the COVID-19 pandemic and that will force management to take a $190 million to $230 million writedown.

Credit Suisse’s price target on the stock is $24 a share.

Deserving a premium

Meanwhile, Morgan Stanley stuck to its “overweight” recommendation on the Metcash Limited (ASX: MTS) share price after yesterday’s profit results announcement.

“We had expected a strong trading update but were still surprised (most notably with Liquor and Hardware),” said the broker.

“Beyond current tailwinds we believe MTS warrants a higher multiple vs. history given diversification and balance sheet strength.”

Management reported 9% growth in its grocery distribution business in the first seven weeks of FY20. This is despite the loss of the Drakes contract.

Morgan Stanley estimates that this means growth in supermarkets was actually running around 11% when the broker was only forecasting around 9%.

The broker upped its price target on the stock to $3.50 from $3.30 a share.

Back in businesses

Finally, the Stockland Corporation Ltd (ASX: SGP) share price surged by 4.1% in after lunch trade to $3.66 after Goldman Sachs restated its “buy” recommendation on the property group.

Stockland provided an update on property revaluation and dividend. The value of its commercial property portfolio will decline by 6%, which is better than what the market expected.

Its commercial properties include malls, which have been hit by the coronavirus lockdown. However, its malls are reopening faster than expected with around 95% of its retail tenants by income starting to trade again.

The devaluation also compares favourably with its peers with GPT Group (ASX: GPT) cutting the value of its retail portfolio by 9% and Vicinity Centres (ASX: VCX) expecting an 11% to 13% drop.

Stockland also said it expected to pay a second half distribution of 10.6 cents per share. This takes the full year payout to 24.1 cents when consensus was expecting only 23.9 cents.

Goldman’s price target on the stock is $4.43 a share.

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• Leading brokers name 3 ASX 200 shares to sell today
• ASX shares in danger? Why the gold price is creeping towards all-time highs

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK 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.

The post Why top brokers are urging you to buy SEEK and these other ASX stocks today appeared first on Motley Fool Australia.

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