James Hardie’s (ASX.JHX) fiscal 2027 first-quarter adjusted EBITDA of USD 422 million exceeded quarterly guidance. Most sales growth was in the fiber cement siding category, despite a backdrop of a subdued residential construction sector in its main market of the US.

Why it matters: There are no signs of an improvement in the US residential sector. Rather, revenue and margin growth in the quarter was due to Hardie’s execution of vinyl-competitive strategies, pricing and product mix growth, and restocking by distributors following destocking last year.

  • We are impressed by two major strategies that we expect to win over some price-conscious customers who might otherwise have chosen vinyl. This includes a competitively priced range, ColorPlus, and a cheaper and faster-to-install trim method.
  • Revenue declined 5% in decking, rail, and accessories from the prior year, with an intentional pullback on stocking at distributors following poor weather over winter that delayed building projects. But we think this is over, with guidance for stronger quarterly sales over the rest of the fiscal year. We think decking is more discretionary than siding and expect lower volumes during market weakness.

The bottom line: We maintain our fair value estimate of $45 per share for wide-moat James Hardie. We make minor changes to our model, mostly to align with updated fiscal 2027 revenue and EBITDA guidance, about 3% and 5%, respectively, below our prior estimates. Shares are trading close to our valuation.

  • We expect a recovery in North American housing volumes over 2027, before reaching our long-term average of about 1.5 million new houses per year from 2028. Hardie’s strategy to sign up the largest building companies, in addition to contractors and new distributors, supports sales growth.
  • Over the long term, we expect mid-single-digit sales growth, derived from above-inflationary price increases, mix shift to higher-priced products, and above-market volume growth.

James Hardie Lifts First-Quarter Guidance on Strong Siding and Trim Sales

James Hardie’s growth strategy includes marketing directly to homeowners, market share growth, and category expansion. We view this as rational and achievable, given past success. We estimate Hardie has about 90% market share in the fiber cement category in its main geography of North America, which contributes about 80% of group operating income. About 60% of North American EBIT is from repair and renovation, or R&R, and the remainder is from new house construction. We view the R&R market as less cyclical, with homes needing to be re-sided approximately every 40 years. According to the US Census Bureau, about half of all houses are 40 years or older. As such, we expect a steady pipeline of homes requiring siding replacement or repairs through the next decade.

A focus on marketing directly to homeowners sees James Hardie promote demand for its fiber cement-based products emphasizing product value, durability, and design. The strategy to increase penetration and grow market share involves taking share from competing siding products seen as less durable or higher maintenance. Indeed, over the five years to 2022, the Census Bureau reports that fiber cement siding on newly built houses gained 3% market share in the US compared with vinyl (down 2%), stucco (up 2%), brick (down 2%), and wood (down 1%). Fiber cement siding was the siding of choice in 22% of all new US house completions in 2024. We estimate that James Hardie fiber cement siding is on about 8% of existing US houses.

Another growth initiative is targeted architectural products to appeal to higher-end markets, penetrate regions with different housing styles, and compete with costlier siding materials such as stucco and brick. This involves leveraging research and development into new products to better fit markets and/or improve margins. The firm’s primary R&R market is the US Northeast and Midwest, where the climate and house framing style suit traditional overlap siding, but newer products are targeted at other regions, such as a stucco-look product that competes in the predominantly stucco-clad Southwest.

Bulls Say

  • James Hardie’s US segment continues to take market share from lower-cost alternative siding materials, such as vinyl and wood, despite higher prices and a downturn in residential spending.
  • Economic cycles aside, James Hardie’s wide economic moat provides a strong defense for long-term earnings and returns.
  • About one-fourth of all new house builds in the US use fiber cement siding, supporting the firm’s future repair and renovation pipeline as these homes will eventually need re-siding or repairs.

Bears Say

  • High interest rates are likely to damp demand for new housing.
  • US homebuyers could continue a shift toward multifamily units rather than single family, causing fiber cement siding demand to decline.
  • Despite two decades in the region, uptake of fiber cement in Europe has been slow and meeting midterm financial targets in this segment seems unlikely.

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