Fletcher shares drop to 2014 low as investors sell on guidance

Shares of Fletcher Building [NZX: FBU] have fallen to their lowest level of the year after the building supplies and construction company's earnings guidance disappointed investors. 

The Auckland-based construction and building materials company told shareholders at their annual meeting yesterday that full-year operating earnings in this financial year could rise between 4.2 percent and as much as 11 per cent to a range of between $650 million and $690 million, compared to $624 million in the 2014 year. In New Zealand, the positive trend in residential housing consents in the second half of last year is expected to flow through to housing construction. However, in Australia, the outlook is more patchy with residential housing consents positive but non-residential less rosy. 

Fletcher shares fell 2.3 percent to $8.41, their lowest level since late December last year and some 15 percent below their April intra-day peak of $9.95 in 2014. The stock is rated an average "buy", based on the consensus of 10 analysts surveyed by Reuters, with a median price target of $9.70. 

"Overnight the analysts have crunched the numbers and haven't been too favourable and that's why there's a bit of selling," said Grant Williamson, director at Hamilton Hindin Greene. "Investors would have liked to see a bit more growth coming through. Australia is not helping. They're expecting lower earnings from the Australian businesses so that does seem to be weighing a bit on the result."

In Australia, Fletcher expects continued improvement in those businesses exposed to residential building, and some of the benefits of restructuring in its Laminex and Tradelink businesses. Departing chairman Ralph Waters in his final address to shareholders yesterday said the non-residential outlook across the Tasman "is less positive, with declining private sector mining investment and relatively low levels of budgeted government expenditure on core road and rail infrastructure projects, at least for the next 12 months. We do not expect to see a marked improvement in commercial construction activity."

(BusinessDesk)