Yesterday's trading update by Fletcher Building provided evidence to Morgan Stanley that softening macroeconomic data in both Australia and New Zealand is materially impacting the company's earnings.
While a backlog has helped hold up construction activity, the update highlighted a -10% decline compared to the 2Q in market volumes in Australia (-5% for NZ), suggesting to the analysts the backlog is finally starting to erode.
Management lowered FY24 EBIT guidance by -13% at the mid point to NZ$500-530m from NZ$540m-640m.
Morgan Stanley's target drops to $2.84 from $3.67 and the Equal-weight rating is maintained as the broker sees further macro risk in both of the company's key construction markets. Industry View: In-Line.
Sector: Materials.
Target price is $2.84.Current Price is $3.22. Difference: ($0.38) - (brackets indicate current price is over target). If FBU meets the Morgan Stanley target it will return approximately -13% (excluding dividends, fees and charges - negative figures indicate an expected loss).
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