Goldman Sachs New Zealand has downgraded shares in Fletcher Building to "neutral" from "buy" after a strong run-up in the stock.
Shares in Fletcher Building last traded at $8.92, up 7 cents from Monday's close, having traded in a $5.69 to $9.52 range over the last 52 weeks.
Goldman Sachs NZ said Fletcher Building had responded to clear evidence of a strong emerging recovery in New Zealand construction and a stabilisation in the Australian housing cycle, but that it had now reverted to "a fair cyclically adjusted valuation".
The brokerage said it remained comfortable with its earnings forecasts for Fletcher Building, which it said would be driven by a strong New Zealand recovery over the 2013 and 2014 financial years.
"Additionally, we expect material growth contributions from Formica's US exposure, Fletcher Construction's advancement of major construction projects, particularly in 2014, and cost reductions," Goldman Sachs said.
"At current levels, however, we believe the share price has reverted to a cyclically adjusted fair value and now represent a more balanced risk-reward," it said.
"In our view, Fletcher Building is broadly fairly priced at current levels. For the stock to outperform the market from here requires earnings upgrades and/or the stock to trade at valuation multiples above the long-term median," it said.
Fletcher Building's results for the six months ended December 31 are due out on February 20. The company said late last year that it expects operating earnings for the full year to be in the range of $560m to $610m, up by between 12 and 22 per cent on the previous year's, on a re-stated basis.