Morningstar | Narrow-Moat James Hardie Performs in 3Q 2019 Despite Soft U.S. Housing Starts
Despite its recent sell-off, James Hardie remains ideally positioned to benefit from the near-term upswing in U.S. housing construction and from a resumption of market share gains. The market's expectations for Hardie were previously set too high, with the share price having implied that Hardie's terminal share of the U.S. residential siding market would approach 30%. Such a scenario would have involved vinyl being entirely pushed out of the market by fibre cement and engineered wood siding systems, which we continue to view as unlikely. Vinyl’s cost advantage appeals to the low end of the market and should see it retain share near the 10% mark longer-term, down from a current 26%. However, Hardie's share price now implies the moderated expectation of an approximate 18% terminal U.S. market share. With the market's assessment now set below our forecast of 25% terminal share, value has now emerged in the name.James Hardie Industries is engaged in the manufacturing and selling of fiber cement products and systems for internal and external building construction applications in the United States, Australia, New Zealand, the Philippines and Europe. Co.'s fiber cement products are used in a number of markets, including new residential construction, manufactured housing, repair and remodeling and a variety of commercial and industrial applications. Co. manufactures numerous types of fiber cement products with a variety of patterned profiles and surface finishes for a range of applications, including external siding and soffit lining, internal linings, facades, and floor and tile underlayments.
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