KeyBanc Favors Favors Accumulated Wealth For Investing for Homebuilders; Downgrades MDC & DHI

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In a report published Friday, KeyBanc Capital Markets analyst Kenneth Zener updated their macro view of the housing sector in 2014, favoring “exposure to wealth vs income trends.” Zener downgraded
MDCMDC
and
DR HortonDHI
from Buy to Hold and increased the price target on Buy rated
Fortune Brands Home & SecurityFBHS
and
Beacon Roofing Supply
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BECN
from $47.00 to $53.00 and $42.00 to $45.00, respectively. KeyBanc noted, “Economic fundamentals suggest preference for our Building Products names over the Homebuilders, and within Products, we focus on names with late-cycle exposure, company-specific catalysts, and / or a greater likelihood of positive est. revisions. Beyond the "spring trade", we are increasingly selective among the Builders and see a less compelling risk / reward equation, given current valuations.” Analyst Kenneth Zener remarked that he favors exposure markets with backing from accumulated wealth from appreciated assets. The analyst noted that economic structural issues continue to impede a cyclical recovery in the new home market. KeyBanc specifically pointed out that median household income is still 9% below the 1999 peak and current unemployment is close to 10% (than the BLS reported 6.7%). The analyst maintained the near-term view on investor exposure to “spring trade” (November-February) when the group outperforms. Keybanc favors building products including Fortune Brands and Whirlpool Corp.
WHR
.
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Posted In: Analyst ColorDowngradesPrice TargetAnalyst RatingsKenneth ZenerKeyBanc Capital Markets
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