Shares in building and construction materials multinational Boral Limited (ASX: BLD) have climbed over 4% to new 52-week highs of $7.48 following a Q1 2018 trading update at the company's AGM on Thursday.
The company's Australian division exceeded management's expectations because of unseasonably dry weather along the major East Coast markets.
The dry weather led to an unexpected surge in construction activity which more than offset difficulties in Western Australia. The company's outlook for FY18 was updated to high-single-digit EBIT growth (excluding property) assuming a return to more normalised weather conditions.
The news was less positive for the walls and ceilings solutions division USG Boral. Q1 results were below expectations due to a one off temporary closure of a port facility in South Australia that was subsequently re-opened in late September.
The company's Sheetrock plasterboard is continuing to gain market share and is expected to deliver price, volume, and cost benefits across all markets. Management has guided for divisional profit to grow at a high-single-digit rate for FY 2018.
North America Division
Boral's North America division delivered a mixed result in Q1 with results below expectations as a result of Hurricane Harvey in Texas and Hurricane Irma in Florida.
The financial impact of the natural disasters on the company's bottom line is estimated to be between US$5 million to $10 million. Pleasingly, the integration of Headwaters is progressing well and remains on target to deliver synergies of between US$30 million to US35 million.
The company expects significant growth in EBIT in FY 2018 from the first full year of synergies following the Headwaters acquisition and growth in US housing starts, infrastructure activity, non residential and repair and remodel construction.
Foolish takeaway
Shares in Boral are trading at an above average market multiple at approximately 20 times forward earnings. There is a lot to like about the company with expected near term growth in construction activity.
Boral also provides an opportunity for Australian investors that are bearish on the Australian dollar to profit from the company's North American division which should do well with an increase in US housing starts, Trump infrastructure spending and potential US company tax cuts.
Analysts at Macquarie and Morgan Stanley are bullish on the stock after issuing outperform and overweight ratings with price targets of $8.25 and $8.50 respectively this morning.
