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James Hardie share price surges following half-year results

With the James Hardie share price now rising 19% in the last five trading sessions, we take a look at the likely catalyst behind these gains.

James Hardie half-year results in focus Source: Bloomberg

The James Hardie (ASX: JHX) share price has now risen over 19% in the last five trading sessions, likely spurred on first by anticipation of strong half-year results and then confirmed by the release of said results last Thursday.

Overall, this recent bullish price action is hardly surprising when you consider that during H1 FY20 the company's net sales rose 2%; net profits attributable to shareholders climbed 18% – to US$189m and net tangible assets per ordinary share ran-up 21% – to hit US$1.52 per share.

Ultimately, these solid half-year results cap off a year for James Hardie the company and its investors, with its share price now up 92% YTD.

In step with these results, brokers continue to like the stock. For instance, UBS has a buy rating and a $30.00 price target on JHX, while Morgan Stanley has an overweight rating and a $28.00 price target on the company. These bullish views look to be well reflected in the broader analyst consensus for the company. Overall and according to the Wall Street Journal, JHX has a consensus overweight rating, with seven out of the 11 analysts covering the stock rating it a buy.

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James Hardie share price: CEO comments

Commenting on these half-year results, James Hardie’s CEO, Dr Jack Truong said:

'We are pleased with our second quarter performance, delivering Net Sales and EBIT growth in local currency in all three regions: North America, Asia Pacific and Europe.’

Dr Truong continued by saying these results:

‘Reflects our team's continued good execution of our global strategic plan.'

Half-year dividends at a glance

On the dividend front, the company reported a first half dividend of US$10.00 cents per share, set to be paid to CUFS holders on December 20. Importantly, this divided and all future dividends, will be 'unfranked for Australian taxation purposes.'

According to the ASX, James Hardie (ASX: JHX) currently has a dividend yield of just 1.46%.

The outlook moving forward

Speaking of the outlook, James Hardie’s management commented that:

'We expect modest growth in the US housing market in fiscal year 2020. The Company continues to expect new construction starts between approximately 1.2 million and 1.3 million.'

More locally, the company notes that it expects 'our addressable underlying market will continue to experience high single digit percent contraction in fiscal year 2020 compared to fiscal year 2019. We expect volume from our Australian business to continue to grow above the market.'

Such comments evidently haven’t stopped local and international investors from snapping up the company’s stock in the last few trading sessions.

2020 earnings guidance

Finally, the company noted that it currently expects full-year adjusted net operating profits of between US$340m to US$370m.

Importantly however, this guidance comes with a number of key assumptions, including that:

'Housing conditions in the United States remain consistent and in line with our assumed forecast of new construction starts and repair and remodel activity, input costs remain consistent and an average USD/AUD exchange rate that is at or near current levels for the remainder of the year.'

Indeed, James Hardie's management were careful to flag American housing conditions as 'somewhat uncertain'.

The James Hardy (ASX: JHX) closed out today’s session at $28.64.

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