James Hardie Industries experienced a sharp decline in its U.S.-listed shares on Tuesday, falling 6.1% during regular trading and an additional 2.6% in after-hours activity. The drop came after the building materials company reported a significant drop in quarterly net income, even as revenues surged past expectations.
The company's fourth-quarter net sales climbed 45% year-over-year to $1.40 billion, driven largely by the acquisition of AZEK. However, net income plummeted 35% to $28.5 million, down from $43.6 million in the same period last year. Organic net sales, which exclude acquisition and portfolio changes, slipped 1%.
James Hardie's performance is closely tied to the U.S. housing market, and the company pointed to persistent weakness in housing demand as a primary headwind. CEO Aaron Erter noted that results came in above guidance despite what he described as a challenging operating environment. Adjusted EBITDA rose 42% to $380.9 million.
The company's Siding & Trim segment bore the brunt of the slowdown, with organic net sales falling 7% due to lower volumes in single-family exteriors. The segment's operating margin contracted to 19.1%, down from 28.2% a year earlier. The Deck, Rail & Accessories segment, which includes AZEK, contributed $345.3 million in net sales and $97.5 million in adjusted EBITDA for the quarter. Adverse weather conditions in February and early March dampened sell-through, leading dealers to maintain higher inventory levels, which is expected to weigh on first-quarter results.
Looking ahead, James Hardie provided guidance for fiscal 2027, projecting net sales between $5.25 billion and $5.41 billion and adjusted EBITDA in the range of $1.45 billion to $1.50 billion. The company also targets free cash flow of at least $500 million after capital expenditures.
Chief Financial Officer Ryan Lada struck a cautious tone, stating that the operating environment remains uncertain and that the company is not assuming a market recovery. He emphasized that cost synergies, manufacturing savings, and disciplined capital allocation would be key to navigating the headwinds.
The housing market outlook remains cloudy, with Home Depot reporting that U.S. consumers are postponing major remodeling projects due to affordability concerns. Competitors such as Trex maintained their 2026 outlook despite a mixed first quarter, while Louisiana-Pacific saw siding revenue decline 10%. Owens Corning also noted weakness in discretionary remodeling and new residential construction.
James Hardie's long-term debt surged to $4.49 billion from $1.11 billion following the AZEK acquisition, raising questions about the company's ability to weather a prolonged downturn. The company highlighted risks including changes in interest rates, construction activity, raw-material costs, and integration challenges related to AZEK.
Australian investors are now awaiting the open of the ASX cash market, which had not yet traded on the results as of publication. James Hardie shares on the ASX closed Tuesday at A$26.78, up 2.9% ahead of the earnings release.