Investing.com -- Jefferies has identified leading stocks in the US Building Products sector, taking a barbell approach that favors secular winners in housing alongside non-residential and infrastructure names, despite headwinds from higher interest rates and energy prices.

The firm lowered estimates across the sector to reflect elevated rates and inflation, with the 30-year fixed-rate mortgage now in the mid-7% range. Jefferies expects single-family new residential construction to decline in the low single digits and repair and remodeling activity to remain flat in 2027. However, analysts note that given the sharp sell-off, the group is trading at the low end of historical multiples.

James Hardie Industries

Jefferies expects the company to deliver a solid quarter, with management reiterating second-quarter and fiscal year 2027 EBITDA guidance at its recent investor day. The firm is increasingly confident James Hardie will significantly exceed its $500 million cross-sell synergy target, with gains expected to materialize in 2027. This confidence stems from the sizing of a decking business at $500 million in sales and the conversion of legacy distributors.

Trex Company

Jefferies likes the setup for Trex, citing re-accelerating growth. Management noted at the firm’s conference that momentum continued in August. Increased investments are paying off, with web traffic data indicating visits were up 100% year-over-year in the third quarter.

Louisiana-Pacific

The company is seeing improvement in oriented strand board pricing, which has risen 26% since recent August lows following curtailment at Jasper and downtime at Maniwaki. Jefferies raised estimates on higher OSB prices, and management noted siding has seen continued order momentum carry into August.

Martin Marietta Materials

Jefferies believes the stock is poised for a relief rally. Pricing letters for January have been in the 8% to 10% range, suggesting 6% to 7% pricing should be achievable and would be well received by investors. The firm recently calibrated expectations for higher diesel costs.

Vulcan Materials

Similar to Martin Marietta, Vulcan is positioned for a relief rally with strong investor interest. January pricing letters have been in the 8% to 10% range, and a mid-single-digit pricing framework for 2027 could trigger positive stock movement.

Ferguson Enterprises

The company is included among Jefferies’ preferred non-residential and infrastructure names in the barbell approach for the sector.

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