In Brief: Acrow, James Hardie & Pro Medicus

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This story features ACROW LIMITED, and other companies.
For more info SHARE ANALYSIS: ACF
The company is included in ALL-ORDS

Three companies with appealing investment cases where share prices have been oversold or derated, offering investors another bite of the cherry.

• Acrow has yet to realise the contract wins from the Brisbane Olympics build out
• James Hardie signals a positive change in momentum post a torrid nine months
• Pro Medicus' latest contract in accelerating segment of radiology trends

By Danielle Ecuyer

This week’s quote comes from DBS Group:

“We expect China GDP growth of 4.5% in 2026 as the first year of the 15th Five Year Plan unfolds.

“Manufacturing shifts to high-tech, with AI lifting innovation.

“Infrastructure will be supported by early 2025 local government bond issuance.

“Export upgrading toward higher-tech, higher-margin goods, deepening global links.

Weak property market, aggregate demand and uncertain jobs outlook will remain drags to growth.”

Regional softness belies upside earnings growth potential

National engineering solutions company Acrow ((ACF)) just can’t find the investor love.

In contrast, brokers are almost tripping over themselves to espouse the attractive growth story as yet again highlighted in its trading update and 1H26 AGM guidance.

Moelis and Petra Capital have been quick on their feet to offer updates.

Petra saw the quantitative guidance as a tad weaker than expected but the qualitative commentary on the outlook remained upbeat.

Acrow is a story about near-term headwinds and constraints on earnings versus how upbeat the analysts are on the ramp-up in Brisbane Olympics contract-related work from 1H27.

The company has experienced a pick-up in pipeline work of 14% since August. Formwork which has been disappointing, notably with some weakness particularly around SE Queensland, is expected to recover over 2H26.

Moelis notes an increase in the pipeline year-to-date of 25% to $248m, but softer conditions currently in Queensland are weighing on the analyst’s enthusiasm, until.

This is the big story for the engineering services and equipment provided: the upcoming build-out for the 2032 Olympics. Management offered first commentary around the Olympics at the AGM with construction activity anticipated to pick up from 1H27.

Venue projects construction value stands at some $7.1bn with peripheral work up to $10bn-$30bn.

Petra sees management as using the expected robust cash flows from Brisbane Olympics projects to lower debt and conduct opportunistic acquisitions in industrial access.

Further diversification into industrial access, including specialised scaffolding, access equipment, labour and safety solutions used to support maintenance, shutdowns and capital works across heavy-industry sites in Australia, is viewed as making underlying earnings less cyclical and more consistent.

Net gearing for Acrow stands at 40.4% in FY25 and Petra forecasts it to fall to 23.9% in FY28.

Petra is Buy rated with a $1.64 target price, while Moelis is also Buy rated with a $1.31 target.

FNArena’s daily monitored brokers have a consensus target price of $1.263 with a further three Buy ratings.

Management and board changes, boost sentiment as inventory falls

Fallen building materials star, James Hardie Industries ((JHX)) appears to have turned a corner with a reversal in negative earnings momentum.

Going into the 2Q26 results update, Jarden stressed the announcement had been essentially de-risked with most of the metrics pre-announced.

The major positive from the update was an upgrade in guidance, albeit off a low base.

From an operational standpoint, the results met expectations with the guidance upgrade related to subsiding US legacy fibre cement inventory issues rather than a pick-up in demand. Notably, fibre cement net sales were down around -3% y/y.

There were also indications of a slight improvement in operating leverage with raw material prices showing signs of easing and now expected to be mid-single digit, versus high-single digit before.

Management also pointed to improving asset utilisation from plant under-utilisation which had weighed on adjusted earnings (EBITDA) margins in the legacy North American fibre cement business by some -400bps.

Jarden continues to like the company, emphasises the quality of the James Hardie legacy business and the recently acquired Azek business. Overall, activity should be boosted by possible builder incentives, rate cuts in the US to assist with affordability, and ageing US housing stock.

The appointment of Nigel Stein to Chair of the Board is also considered a positive. Stein is an independent non-executive director who joined the board in May 2020 and whose current term is due to finish in August 2026.

Management was reshuffled with the succession of Ryan Lada to the CFO role, replacing Rachel Wilson who had been at James Hardie since August 2023. Lada was previously the CFO and Treasurer of Azek.

The broker tweaks EPS estimates by -1.5% for FY26 and raises FY27 by 3.3%, while retaining an Overweight rating.

From a sentiment perspective, investors and analysts were audibly relieved to see inventory de-stocking, possibly signalling the start of a turnaround. Target set at $39.

New contract trends belie share price weakness

The latest contract announcement from Pro Medicus ((PME)) brings the 1H26 year-to-date contract wins to $234m.

The deal with Advanced Radiology Management (referred to as ARM) came after a four-month hiatus of no announcements, Canaccord Genuity points out, and brings forth $44m over five years in what is described as a Viewer-only transaction.

The lack of new contracts coincided with or contributed to the share price sell-off, which the analyst attributes to one of the risks of investing in such a high-quality company with a valuation of over 100x enterprise value/earnings (EBITDA).

Share price volatility is part and parcel of a high valuation being ascribed to a stock like Pro Medicus, particularly during risk-off periods.

Equally, impatience around a lack of new “big” announcements could have further eroded sentiment with the market left wanting another $100m-plus deal.

Potential impacts on the US healthcare system from President Trump’s One Big Beautiful Bill were also highlighted as a causal factor. Industry feedback suggests the Bill has negative implications for regional/rural hospitals from cuts in Medicaid.

Canaccord is conducting ongoing research into these concerns.

The latest contract brings forth momentum in an existing but accelerating trend in the US radiology market, which is the growth in decentralisation of radiology.

ARM is classified as a reading/teleradiology group, which are beneficiaries of decentralisation. Teleradiology presents a move of the radiology workflow from being tied to a single hospital or physical site towards a distributed, national network of radiologists who interpret scans remotely.

The analyst reminds investors it models a $69m/half-year period deal run rate as a base case for new contract wins.

Since FY23, when the base rate was first applied, the rolling two-year average has advanced to around $200m/half-year, but taking out the three mega deals (UCHealth, Trinity $330m and BSWH $140m), the rolling average remains above the analyst’s base case at $75m/half-year.

The upcoming Radiological Society of North America’s annual conference in Chicago could be a positive catalyst. Canaccord assures investors there is enough potential depth in the pipeline to convert to new contract wins over FY26.

Canaccord maintains its Buy rating and $350 target price.

The author owns Pro Medicus shares in a SMSF.

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