Chicago, IL – March 31, 2023 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: KB Home KBH, NVR, Inc. NVR, Toll Brothers, Inc. TOL, PulteGroup, Inc. PHM and Taylor Morrison Home Corp. TMHC.
Here are highlights from Thursday’s Analyst Blog:
Pending Home Sales Rise in February: Housing to Rebound?
According to the National Association of Realtors, pending sales of existing homes improved sequentially for the third consecutive month in February. Impressively, the Pending Home Sales Index (PHSI) was way above the analysts' expectations of a decline of 3%.
On Mar 29, this forward-looking indicator of home sales increased 0.8% to 83.2 in February despite rising home prices and interest rate issues. On a year-over-year basis, pending home sales were down 21.1%. The metric jumped in all the regions (barring the West) on a month-over-month basis. However, they declined from year-ago readings.
NAR’s chief economist, Lawrence Yun, stated, “Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amidst uncertainty in the financial market. While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available.”
The Zacks Building Products - Home Builders industry has moved up 15.8% compared with the Zacks Construction sector and the S&P 500 Index’s growth of 8% and 5.2%, respectively, in the three months.
KB Home, NVR, Inc., Toll Brothers, Inc., PulteGroup, Inc. and Taylor Morrison Home Corp. increased 26.3%, 17.8%, 19%, 25.5% and 21.2% in the past three months, respectively. While NVR and TMHC currently sport a Zacks Rank #1 (Strong Buy), KBH and TOL carry a Zacks Rank #2 (Buy). PHM currently holds a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Recovery for Housing?
It has been more than a year since the the U.S. construction market has been dealing with high material and labor costs and supply-chain disruptions. This led to accelerated home prices and insufficient inventory to build new homes. The Fed’s intention of reducing inflation via a series of interest rate hikes was another woe.
Nonetheless, consumers have shown a sign of optimism about the future of housing. The recent consumer confidence data, reported by the Conference Board, rose 0.8 points in March from February. The upside reflects consumers are planning to spend more on less discretionary categories such as home maintenance and repair.
The median home prices have also started decelerating in the past few months. Homebuilders are confident about late 2023, thanks to the rising need for more work-at-home space and the lack of existing homes for sale. Homebuilders are now more focused on cost control efforts, operating leverage and buyouts. These are expected to support the growth of the industry.
The changing demography of housing has been supporting the demand for new homes in lower-density markets, including small metro areas, rural markets and large metro exurbs. The desire for more space and amenities to accommodate working and learning from home should continue to boost the U.S. housing market in the near term.
A Look at the Listed Companies’ Recent Quarterly Results
KB Home reported better-than-expected results in first-quarter fiscal 2023 (ended Feb 28, 2023), defying the challenging housing market conditions. Its earnings and revenues beat the Zacks Consensus Estimate.
KBH reported adjusted earnings of $1.45 per share, which topped the consensus estimate of $1.05 by 38.1%. In the year-ago period, the company reported earnings of $1.47 per share.
NVR reported fourth-quarter 2022 results, wherein this homebuilding and mortgage banking company’s earnings and revenues beat the Zacks Consensus Estimate.
The company reported earnings of $133.44 per share, which surpassed the consensus mark of $104.10 by 28.2%. The reported figure increased 49.8% from the prior-year quarter’s figure of $89.09 per share.
Toll Brothers reported first-quarter fiscal 2023 (ended Jan 31, 2023). Both the top and bottom lines topped the Zacks Consensus Estimate. The company delivered strong quarterly earnings and improved gross margin in the quarter despite the ongoing challenges in the industry. The homebuilder has been witnessing higher demand beyond normal seasonality, given the improving buyer confidence.
This Fort Washington, PA-based homebuilder reported adjusted earnings of $1.70 per share, beating the Zacks Consensus Estimate of $1.37 by 24.1% and increasing 37.1% from the year-ago period’s levels.
PulteGroup reported impressive fourth-quarter 2022 results, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate and increased year over year.
Adjusted earnings per share (EPS) came in at $3.63, which topped the consensus mark of $2.88 by 26% and increased 45% from $2.51 per share a year ago. The upside was driven by gains in revenues, improved gross margins and overhead leverage.
Taylor Morrison reported better-than-expected fourth-quarter 2022 results, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate. Its bottom line also increased year over year.
Adjusted EPS came in at $2.93, which topped the consensus mark of $2.91 by 0.7% and increased 32% from $2.22 per share a year ago. The upside was driven by a well-balanced, diverse mix of the portfolio and operating strategy.
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