James Hardie has modestly lifted fiscal 2026 guidance, now targeting adjusted EBITDA of USD 1.25 billion at the midpoint. Lower sales volumes in siding and trim are due to weak US residential housing, but retailer destocking has ended, leading to a stronger sales outlook for the rest of the year.

Why it matters: While shares rallied about 11% on the announcement, the result is largely as we expected and we make no change to our fiscal 2026 revenue or adjusted EBITDA estimate, which is at the midpoint of updated guidance.

  • In North America, we expect high-single-digit volume declines due to soft US housing to be partly offset by a low-single-digit increase in price. But we forecast a recovery in volumes from fiscal 2027 driven by expected lower interest rates.
  • It is on track to achieve guided cost savings and sales benefits from the Azek combination next year. We now assign 100% of guided benefits in fiscal 2027 but believe near-term wins are likely to be lower-hanging fruit, making it harder to achieve in later years. As such, we don’t ascribe the full guided benefits in our estimates.

The bottom line: We maintain our fair value estimates of $42 (USD 30 at Feb. 11’s exchange rates) for wide-moat James Hardie. After Feb. 11’s increase, the share price is closer to our valuation but still offers a 12% discount. We think the market is more bearish on the sales uplift and cost savings from the Azek acquisition.

  • We see a reasonable runway for sales growth as the two companies’ products are bundled together. Hardie has a much bigger distributor and installer network, thereby opening up new sales channels for Azek’s products.
  • We expect US mortgage rates to ease over 2026, supporting a rebound in spending on repairs and renovations. In the US, about half of homes are over 40 years old, the prime age for residing, and fiber cement is one of the most popular siding materials alongside stucco and vinyl.

James Hardie fiscal 2026 guidance modestly lifted; On track to meet combination benefits

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 two-thirds 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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