James Hardie Industries plc (ASX: JHX) shares are up after the building materials company increased its guidance.
James Hardie’s improved guidance
James Hardie said that it is increasing its net operating profit after tax (NOPAT) guidance range to between US$380 million and US$420 million for the full 2021 financial year.
Its LEAN manufacturing transformation will allow it to consistently and efficiently deliver premium quality products and service to customers. The LEAN manufacturing and zero harm focus have enabled the company to meet growing demand for its fiber cement and fiber gypsum building materials.
James Hardie also gave guidance for its second quarter of FY21.
Net sales guidance for Q2 is between US$735 million to US$740 million, which would be growth of around 12%. Adjusted EBIT (click here to learn what EBIT means) is expected to be US$160 million to US$165 million, representing growth of 22%. The EBIT margin is expected to be around 22%, an improvement of 200 basis points (2%).
James Hardie CEO Jack Truong said: “This transformation, which is driven by a continuous improvement mindset, has enabled our ability to deliver consistently improving financial results.”
Summary
This is a solid update from James Hardie, though it’s hard to say how long this strong performance will continue. It’s a quality business and a solid industrial idea. It has rallied strongly since the March crash, so I’m not sure if the good returns have already been made.
At the current James Hardie share price it’s valued at 23 times the estimated earnings for the 2023 financial year according to CommSec. I like the look of Brickworks Limited (ASX: BKW) more, with its diversified assets. There are also other ASX dividend shares I’d jump on first over James Hardie.
