Fletcher Building [NZX: FBU], the biggest company on the NZX 50 Index, was upgraded by First NZ Capital because of a pickup in the building sector in Australia and New Zealand and the benefits of its cost cutting programme.
The brokerage lifted its price target to $10.25 from $9 and raised its rating to 'neutral' from 'underperform'. Auckland-based Fletcher is scheduled to release its first-half results on Thursday and First NZ Capital is forecasting a 16 percent increase in earnings before interest and tax to $304 million.
"Our expectation is for a more positive trading outlook commentary since its AGM guidance four months ago," analysts at the brokerage wrote in a report.
At the annual meeting last October, Fletcher chairman Ralph Waters said conditions in the Australian market were expected to remain flat, with some pickup in New South Wales, offset by subdued demand in Victoria and a decline in investment in the mining sector.
The First NZ Capital research says building approvals jumped 23 percent in the second half of 2013 and the recent acceleration in value of residential work approved "promises considerable pent-up growth in the next 12 months." Non-residential approvals had also increased.
In New Zealand, a pickup in net migration would help underpin growth in new house and apartment building consents, with "some signs of activity spreading beyond Auckland and Christchurch."
Infrastructure work is expected to pick up in late 2014 or early 2015 and there are expectations the Treasury's estimated $40 billion cost to rebuild Christchurch will be exceeded, the brokerage said.
"It would not surprise us if the next estimate reaches $45 billion to $50 billion," it said.
The shares rose 0.5 percent to $9.59 and have gained about 12 percent this year.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- Roy Morgan manager defends *that* poll
- Vodafone reports landline gains, more profitable mobile mix for NZ operation
- Stack to the future: new tech centre marks major NZ data tech play
- Businesses say they can't afford to replace outdated equipment
- Good news and bad news for Sky TV in Netflix' horror result
Most listened to
- Business Week in Review with Grant Walker & Andrew Patterson
- Matthew Hooton on the China-NZ trade dispute that wasn’t
- “The justice system never troubled itself in the most elementary way to get the facts to decide the case” - Rodney Hide
- Hunter's Corner: Is the ASX taking our best and brightest?
- Cameron Officer on the car of the week: Mercedes-Benz C 300 Coupe