What Happened to CSR Shares?
Shares in building products group CSR Ltd [ASX:CSR] fell by almost 5% today as the market digested the company’s earnings for the year ending March 31 2014. CSR has endured a tough few weeks, with the shares down more than 13% from their recent peak.
Why Did this Happen to CSR Shares?
At first glance it’s hard to fathom why the stock got belted today. CSR reported a net profit (pre significant items) of $72 million, 143% more than what the company made the previous year. The company’s full-year dividend of 10 cents per share is up 96% on the prior period. And managing director Rob Sindel gave an upbeat assessment of the outlook for Australia’s construction market. So why the rout?
Well, you’ve got to remember what keeps share prices moving. Companies have to keep impressing investors. Stocks have to keep beating raised expectations to maintain an upward trajectory. And CSR shares have had a stellar run, rising from less than $2.00 this time last year to an April 2014 high of $3.86.
Although this profit result came in ahead of what most share market analysts predicted, investors seem to have taken the view that the profit was already in the share price…and so they have taken the opportunity to sell out of the stock.
What now for CSR Shares?
I don’t think there’s any reason for CSR shareholders to panic. The company is strongly leveraged to new housing starts, and the recent pick-up in activity seems to be spreading. Meanwhile, CSR is entering the digital age and will now offer an online sales platform. That’s the kind of sales channel that more Aussie large-caps should embrace.
That said, construction is a highly cyclical industry…so if you own this stock, keep your eye on the economic headlines.
Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator
