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On Monday, James Hardie Industries (NYSE:JHX:AU) (NYSE: JHX), a $10.78 billion building materials company, received an upgrade in its stock rating from ’Equalweight’ to ’Overweight’ by analysts at Morgan Stanley (NYSE:MS), alongside an established price target of AUD55.00. The revision comes after the company’s stock experienced a significant drop in value, falling approximately 21% month-to-date. According to InvestingPro data, the stock’s RSI indicates oversold conditions, trading near its 52-week low of $28.77.
Analysts at Morgan Stanley acknowledged the difficulty in rationalizing the premium paid for AZEK, a recent acquisition by James Hardie. Despite this, the substantial decline in share price has made the stock appear undervalued, even when considering the potential earnings per share (EPS) dilution that could result from the acquisition. The company maintains strong fundamentals with a healthy current ratio of 2.18 and operates with moderate debt levels. InvestingPro analysis suggests the stock is currently trading below its Fair Value, with 11 additional exclusive insights available to subscribers.
Morgan Stanley’s commentary suggests an expectation of fluctuating performance for James Hardie’s stock in the immediate future. Nevertheless, the firm posits that the intrinsic value of the stock is something that investors cannot overlook, especially from a medium-term perspective. The company’s financial health appears solid, generating $3.91 billion in revenue with a gross profit margin of 39.45%.
The upgrade to ’Overweight’ indicates that Morgan Stanley’s analysts now view James Hardie’s stock as a better investment relative to other stocks in the same sector. With the new price target set at AUD55.00, there is an implication of potential growth and recovery in the company’s stock value.
James Hardie Industries, with its revised stock rating and price target, may attract investor interest as market participants reassess the stock’s potential in light of Morgan Stanley’s updated outlook. The company’s near-term stock performance will be closely monitored by investors as they consider the firm’s medium-term value proposition as outlined by the analysts.
In other recent news, James Hardie Industries has announced a significant acquisition, agreeing to purchase composite decking company AZEK in a deal valued at approximately $8.75 billion. The acquisition involves a mix of cash and stock, offering AZEK shareholders a premium based on James Hardie’s previous closing price. Analysts, including those from Truist Securities, have maintained a Buy rating on James Hardie, emphasizing the potential growth and value from this strategic merger. Additionally, James Hardie plans to transition to a primary stock listing in the United States, which is expected to increase liquidity.
In another development, James Hardie has secured an exclusive three-year agreement with M/I Homes (NYSE:MHO), ensuring that Hardie® siding and trim products will be standard in new M/I Homes constructions. This partnership highlights James Hardie’s commitment to providing durable and aesthetically pleasing building solutions. Furthermore, Jefferies has initiated coverage on James Hardie with a Buy rating, citing the company’s strong management of inflationary pressures and its potential for operational leverage. The analysts set a price target of AUD63.00, reflecting confidence in the company’s future performance despite current economic challenges. These recent developments underscore James Hardie’s strategic moves to strengthen its market position and drive future growth.
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