Fletcher Building is expected tomorrow to reaffirm its earnings guidance, meeting the top end of its $650 million to $665m range this last financial year.
Rohan Koreman-Smit and Scott Anderson of Forsyth Barr have an "outperform" on the stock.
"While much was pre-announced at June's investor day, we expect the result will reaffirm a business that is seeing strong demand in NZ but with some cost pressures that are largely being managed with price," the analysts said in a detailed delve into the business out today.
Ross Taylor, chief executive, now has media and analyst calls booked for tomorrow to present for the ASX and NZX listed company.
The company will issue the result around 8.30am tomorrow New Zealand time.
If it does deliver as signalled, the Penrose-headquartered business will book a 315 per cent improvement in earnings before interest and tax for the year to June 30, 2021.
In late May, Taylor presented online to shareholders, telling how well the business was doing - and performance was a major prompt for the $300m ASX and NZX share buyback scheme announcement.
Fletcher made Ebit of $549m in 2019, but only $160m last year partly due to the pandemic and lockdown.
So making $665m is a major recovery, partly from record building work activity and materials demand here and in Australia.
The ForBar analysts are also upbeat about the 2022 year.
"Although Fletcher does not typically provide guidance at its full year result, we suspect FY22 outlook commentary to be continued strength in its NZ divisions but tempering of Australian expectations given the uncertainty created by lockdowns," they said.
They forecast a strong pick-up in earnings.
"Capacity constraints may limit a significant expansion in activity in FY22 but on the positive side this likely elongates the cycle cost pressures," they said.
"We see the greatest risk of disappointment in New Zealand is from margins, given cost pressures. However, Fletcher's domestic manufacturing should benefit from lower import competition and a better pricing environment margin expansion in Fletcher Living," the analysts said.
"We expect FBU's homebuilding margins to be supported by strong Auckland house prices and demand as well as sell down of low margin Christchurch units," they said.
Construction activity in Australia had likely been disrupted by lockdowns there.
Low margins and high operating leverage would likely compound any impacts on FY22 outcomes, as such FY22 outlook statements are likely to be cautious
"We expect net debt to EBITDA to reduce to 0.3x. Fletcher has $275m of its buyback to complete," they noted.
Grant Swanepoel and Luan Nguyen, analysts at Jarden, have a neutral rating on the stock, saying: "While we think volumes will continue at elevated levels, we expect house prices to fall in CY22, down 6 per cent, followed by a further 3 per cent decline into calendar year 2023".
"While we have reduced our FY23 onward forecasts, we have raised our FY21/22 estimates. Due to evidence that trading has been stronger than anticipated going into the FY21 result, we have raised our FBU EBIT estimate to $678m - $13m ahead of FBU's guided range of $650m to $665m.
"We reduce our 12-month target price from $7.34 to $7.27 and retain a neutral rating," the Jarden analysts said.
Last decade, the company recorded losses of nearly $1b from a single division during an unfortunate two years shortly after Taylor started.
"We're very much fighting fit," Taylor said a few weeks ago.
"We're in good shape."
The company employs about 14,500 people and had revenue of about $8b, of which $5.2b is from New Zealand, $2.8b from Australia and the rest from the South Pacific.
Fletcher made a $196m net loss after tax for the year to June 30, 2020.
"Just over half our revenue is exposed to the residential sector," said Taylor at an investor day during May.
Fletcher has a market capitalisation of $6.4b. Its shares are trading around $7.92 on the NZX, up 1 pew cent in the last year.