At time of writing, the share price of Fletcher Building Limited [ASX:FBU] is down 9.17%, trading at $4.705 per share.
Fletcher Building is New Zealand’s largest construction firm which delivers homebuilding, major construction and infrastructure projects.
It has been a tough three months for the company, with the slowdown in the Australian housing market having an impact:
Earnings guidance down on Australian housing market exposure
The company said in an announcement:
‘Fletcher Building expects that EBIT before significant items for HY2019 will be approximately 10% lower than the EBIT before significant items and B+I losses reported in HY2018 … due to emerging challenging Australian trading conditions and the timing of house sales in the Residential Division to date.’
It continued saying:
‘FY2019 Guidance: Fletcher Building expects EBIT before significant items for FY2019 to be in the range of $630m to $680 million.’
Given that the residential market accounts for about 40% of Fletcher Building’s business in Australia, it appears that the company’s earnings will be under pressure for the foreseeable future.
Where does Fletcher Building’s share price go from here?
With a mix of major infrastructure projects in New Zealand and Australia ‘in the pipeline’, Fletcher Building has some ammunition going forward if the residential property market continues to fall off.
However, a sharp dip in the Australian residential market, due to a credit crunch for example, could lead to Fletcher Building revising its earnings again.
These factors could result in some mixed share price performance for Fletcher Building.
For Money Morning