James Hardie (ASX:JHX), the company that caused a lot of controversy last year when it bought U.S. decking company AZEK for A$14 billion in a deal that sidestepped shareholder approval, has posted its full-year results – and profits are down -75% YoY.
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Despite this, JHX actually ended green Wednesday. Flattish green, mind you, but green nonetheless, winning back around half the losses it incurred out the gate in what is one of the more dramatic 1D charts you can get. (That re-entry into green territory didn’t last long, but it still ended up trading more or less flat. Flattish, if you will.)
At least somebody made a lot of money at 10.03am AEST. By 10.06am AEST, the stock had gone firmly in the opposite direction; ten minutes later, it hit its intraday low of $25.54/sh.
Since then, it’s been on the way back up. Despite the fact that profits were down -75% YoY. This reflects to an extent the type of thinking around earnings season reports for big established companies that make profits – earnings expectations and satisfactions (or misses) thereof mean more than NPAT.
At least, sometimes. Sometimes that isn’t true. It really depends on the vibe, and clearly, JHX’s vibe on Wednesday is the company will post better profits next time.
Still, for a -75% drop in profits – that’s three quarters of its total profits in the last full-year report – the fact the stock could end up trading green again is perhaps eyebrow-raising. It was for this finance journalist at least.
Some, clearly, are bullish on the still-controversial AZEK acquisition, which, at the time it was made, after sidestepping a shareholder vote, had a lot of people talking about a need for ASX rule reform.
Those conversations died out in the excitement of the critical minerals rally two months later and have long since been forgotten in the Iran war crisis. It also probably goes without saying JHX clearly has a lot of institutional support: $56M worth of shares had traded hands in JHX as at 2.35pm AEST on Wednesday.
(So too have people forgotten, seemingly, that JHX was de-indexed off the NYSE last year.)
At the time of writing, JHX is worth $26.39ea. That’s just above where they were in March of this year, where they were last November in the extended fallout of the AZEK decision, and where they were in December of 2022, when construction supply chains really started to show structural weakness in the COVID years.
That last time the stock fell below $20/sh was at the start of COVID, when it hit over $18/sh. Since then, it’s generally stayed around $25/sh at crisis points.
That suggests, perhaps, the market thinks the stock’s worth $25/sh. But for a company that made a controversial $14B acquisition last year (sidestepping shareholders), and just posted a profit drop of -75% YoY – maybe that’s not too bad.
JHX last traded at $26.89/sh.
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