Thursday 18th May 2017 |
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First NZ Capital trimmed its earnings forecasts for Fletcher Building's 2018 and 2019 financial years but retained an 'outperform' rating on the stock and held the 12-month target price steady at $9.80.
Fletcher shares dropped 1.3 percent to $8.08 and have fallen 23 percent this year after unexpectedly weak first-half earnings from its construction division followed by an earnings downgrade rattled investors.
In the wake of that and some margin data, First NZ lowered its earnings before interest and tax forecast for Fletcher Building by 3.4 percent to $785 million in FY18 and by 2.3 percent to $827 million in the following year. First NZ said it remains 3 percent above consensus estimates for FY18, according to Bloomberg data.
It noted that the New Zealand housing cycle appears to be moderating due to affordability, access to credit and the pending general election. However, the slowdown is likely temporary and it underscored there is a positive outlook for infrastructure in the wake of the government's announcement it plans to spend an extra $11 billion over the next four years.
"On balance, we think the risks and rewards in this stock remains constructive at its current stock price," First NZ said. "The company is projected to deliver further earnings growth from ongoing strength in the New Zealand building and construction sector, led by higher population growth, demand for housing and infrastructure construction activity."
(BusinessDesk)
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