Fletcher shares plunged more than 12% to $6.92 on Wednesday, after its downgrade announcement, wiping more than $597 million off its market capitalisation and relinquishing the top spot to Telecom.
The share rout continued yesterday, declining a further 3.76% to close at $6.66.
Fletcher cited slow commercial and residential building numbers in both New Zealand and Australia and more delays, because of recent quakes, to getting the Christchurch rebuild under way.
Fletcher is the lead contractor.
Forsyth Barr has downgraded after-tax profit forecasts by 15% to $385.2 million, while Craigs Investment Partners has downgraded its expectations by 18% to $353 million - which compares with Fletcher's last financial year's actual after-tax profit of $359 million.
Craigs Investment Partners broker Peter McIntyre said Fletcher's 10% earnings downgrade was "disappointing", and laid the blame on its laminated board and Panels division, because of softness in the Australian residential sector and also more pressure on margins in its building products division.
"[Also] there is no evidence of the expected full-year 2012 recovery in New Zealand housing and delays to spending related to the Christchurch rebuild," Mr McIntyre said.
Forsyth Barr broker Suzanne Kinnaird said while in the short term it had downgraded net profit forecasts 15%, from $453.2 million to $385.2 million, she encouraged investors to look beyond the short-term earnings weakness.
"While the downgrade is disappointing, we maintain our focus on fundamentals based on a recovery in earnings over the medium-term, beginning in full year 2013," Ms Kinnaird said.
Even based on downgraded full year earnings per shares declining to 74.4c, Fletcher's was being "substantially undervalued".
"This suggests the market is placing too much emphasis on the near-term earnings," Ms KInnaird said.
Ms Kinnaird expected building activity in New Zealand to begin a "strong and sustainable recovery" during the current financial year which should lead to a substantial lift in earnings during 2013.
Mr McIntyre said he remained concerned about the timing of the Christchurch rebuild, and while Fletcher believes construction will begin in earnest in the first half of 2013, Craig's is factoring in reconstruction from the second half of 2013, representing 5% of after-tax profit for 2013.
