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On Monday, Truist Securities maintained a Buy rating on James Hardie Industries (NYSE:JHX) with a steady price target of $45.00. The company, currently trading at $29.28 and near its 52-week low of $28.77, has shown strong financial health according to InvestingPro analysis. Truist’s analyst pointed out that James Hardie has entered into an agreement to acquire composite decking company AZEK. The deal terms include a cash payment of $26.45 and 1.034 James Hardie shares for each AZEK share, which, based on last Friday’s closing price, represents a 37% premium for AZEK shareholders.
James Hardie’s strategic acquisition aims to merge two companies with strong growth trajectories and is expected to yield considerable cost and sales synergies, especially since both companies deal with overlapping contractors. With annual revenue of $3.91 billion and a market capitalization of $12.65 billion, James Hardie brings significant scale to this merger. In addition to the acquisition, James Hardie intends to establish a primary stock listing in the United States, transitioning from its current American Depositary Receipt (ADR) listing. This move is anticipated to enhance liquidity, given that approximately a quarter of the company’s holders are based in the US.
Despite the positive outlook presented by Truist, shares of James Hardie fell by 10% in the Australian market following the announcement. The analyst suggests that Australian investors may not fully appreciate the potential of the composite decking market, despite the acquisition being priced at 19 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). InvestingPro data shows the company’s current EV/EBITDA stands at 12.23x, with additional financial insights available in the comprehensive Pro Research Report, which covers over 1,400 US-listed companies.
Truist’s assessment encourages investors to consider buying James Hardie stock on any potential decline, citing the merger with AZEK as a compelling combination that could drive future growth and value for the company. According to InvestingPro, technical indicators suggest the stock is currently in oversold territory, with 13 additional exclusive ProTips available to subscribers, offering deeper insights into the company’s financial health and market position.
In other recent news, James Hardie Industries announced its acquisition of AZEK in a deal valued at approximately $8.75 billion, involving both cash and stock. This acquisition initially valued AZEK at about $56.88 per share, but following a decline in James Hardie’s stock, the deal’s value adjusted to approximately $52.48 per AZEK share. Analyst Ketan Mamtora from BMO Capital Markets remarked that the acquisition is favorable from an AZEK shareholder perspective and does not anticipate regulatory hurdles. Additionally, James Hardie has secured a three-year exclusive agreement with M/I Homes (NYSE:MHO), ensuring that Hardie® siding and trim products will be standard for all new M/I Homes installations. This partnership reinforces a decade-long relationship and highlights the products’ durability and aesthetic appeal.
Moreover, Jefferies has initiated coverage on James Hardie stock with a Buy rating and set a price target of AUD63.00. The analysts from Jefferies noted the company’s appealing valuation and its resilience in managing inflationary pressures and volume downturns. They emphasized James Hardie’s potential for operating leverage, given its significant latent capacity. These developments reflect a positive sentiment toward James Hardie’s strategic moves and operational strengths in the current market environment.
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