Investing.com -- UBS downgraded James Hardie (NYSE:JHX) Industries to Neutral from Buy after the building materials company reported weaker quarterly earnings and lowered its guidance on North America, its largest market.

First-quarter underlying profit fell 29% from a year earlier, missing consensus estimates by 19%, UBS said. 

The shortfall was driven by a 17% miss in North America earnings, where volumes declined 14% despite a 3% increase in average selling prices. 

James Hardie flagged more than 20% volume declines in its core Southern U.S. states, which account for about 60% of its single-family exterior business.

UBS noted that softer U.S. housing starts, especially in the South, combined with distributors reducing inventory, contributed to the weaker performance. 

Persistent affordability challenges, high interest rates, and tariff volatility have also pressured demand, prompting homebuilders to cut back on new projects.

The company guided to fiscal 2026 EBITDA of $1.05-1.15 billion including Azek, about 15-20% below market expectations. UBS said this implies a low double-digit sales decline in James Hardie’s legacy siding business, compared with an earlier outlook for flat to slightly higher revenue.

UBS cut its earnings estimates for fiscal 2026 and 2027 by 49% and 33%, respectively, citing softer demand, channel destocking, and delayed benefits from new product initiatives. 

While James Hardie has retained market share, UBS highlighted its weaker North American sales compared with peer  Louisiana-Pacific  (NYSE:LPX).

UBS lowered its price target to A$36 from A$50, a 28% cut, and said elevated leverage and reduced returns add to near-term risks. 

Longer term, it expects the company to benefit from structural underbuilding in U.S. housing and material conversion in siding and decking.

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