Why Fletcher Building Ltd’s shares are down Thursday

What happened to Fletcher Building’s share price?

The share price of New Zealand centric construction company Fletcher Building Ltd [ASX:FBU], has fallen by more than 4% Thursday.

Why is the FBU share price down today?

Shares are down this week following news on Monday 20 March of a profit downgrade. In the announcement the company stated earnings could be up to $150 million less than what they had previously forecast.

That saw the share price plunge more than 10%. The dramatic fall in price may have enticed some bargain hunters to enter the market and bid up the share price, however, today the share price continues to trade dramatically lower.

The negative news should not surprise anyone, the chart of the company share price was clearly forecasting bad news to come; breaking through significant lows last month.

This is all going on amidst the biggest construction boom in New Zealand history. A worker shortage has led to project delays and increasing wage bills, and the company is paying dearly to bring delayed projects back on track.

What now for Fletcher Building Ltd?

Margins appear to be tight, and building costs high, so there’s not a lot of room for error going forward.

Really, you’d only be guessing from here. The bargain hunters will look smart if they get it right, but it’s nothing more than a punt. It’s not high probability trading. The problem with trying to buy shares cheaply, is that they can sometimes become even cheaper.

Yes they could jump straight back up, but they could also trade lower or most likely go sideways for a prolonged period of time.

The prudent thing to do would be just watch and wait over the coming weeks and months. Look for some share price support and resistance to form, and then let the market guide any opinions you have on this company.

Terence Duffy,
Lead Researcher, Cycles, Trends and Forecasts


Terence Duffy is an analyst and chartist, specialising in researching economic trends and cycles.  His primary focus is housing and land affordability. But you can also depend on him to offer his unique analysis of stock market charts. As Terence will show you, the charts often forecast, well in advance, the good or bad news to come — which he details in Cycles, Trends and Forecasts.

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