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Homebuilding Sector Getting Some Attention Amid Analyst Note, Upcoming Earnings Data

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Investors in the Homebuilder group are digesting a number of news items Tuesday afternoon. In addition to a research note from a Compass Point analyst earlier, traders are reviewing data out of the NAHB. Later this week, the Street will get results from Lennar and data on housing starts on Wednesday. Quarterly figures from KB Home and existing home sales data will be out on Thursday.

Compass Point analyst Wilkes Graham updated his housing forecast:

  • Graham increased assumed ROI's to 9% on average from 7%.
  • Reduced targeted sector price/ book from $190% to 170%.
  • Expects 20-30% growth in starts and new home sales in 2012 and 2013 to stabilize in 2014 and on at approximately 10%.
  • For covered builders, the analyst lowered estimates by 8% and lowered price targets by 10%.
  • Compass Point expects 10% annual growth in single family starts and new home sales and 2-5% pricing growth.
  • Downgraded DR Horton Inc. (NYSE: DHI) from Buy to Neutral and KB Home (NYSE: KBH) from Neutral to Sell. DR Horton's and KB Home's PT was lowered from $23.50 to $20.00 and from $17.50 to $14.00, respectively.
  • Graham reiterated a Buy rating on Ryland Group Inc. (NYSE: RYL) and Standard Pacific Corp. (NYSE: SPF). The analyst raised the PT on Ryland from $50.00 to $50.50 and lowered the PT on Standard Pacific from $10.00 to $9.50.
  • Compass Point reiterated a Neutral rating on Beazer Homes USA Inc. (NYSE: BZH), Hovnanian Enterprises Inc. (NYSE: HOV), Lennar Corp. (NYSE: LEN), PulteGroup, Inc. (NYSE: PHM), and Toll Brothers Inc. (NYSE: TOL). The price target for Beazer and Hovnanian was raised from $15.50 to $24.00 and $5.00 to $5.75, respectively. Graham lowered the PT for Lennar, Pulte, and Toll to $34.50, $17.00, and $31.00.

This Week's Data

  • NAHB Housing Market Index for December was reported this morning at $58.00 versus the $55.00 estimate and $54.00 prior.
  • On Wednesday, the Census Bureau is expected to report November housing starts at 954,000 and building permits at 990,000.
  • On Thursday, the National Association of Realtors data for existing home sales for November is expected to be down 2% MoM to the seasonally adjusted annual rate of 5.02 million units.

Latest Ratings for DHI

DateFirmActionFromTo
Apr 2021Argus ResearchMaintainsBuy
Apr 2021BarclaysMaintainsOverweight
Apr 2021RBC CapitalMaintainsOutperform

View More Analyst Ratings for DHI
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Posted-In: Census Bureau Compass Point NAHB Housing Market Index National Association of Realtors Wilkes GrahamAnalyst Color Markets Analyst Ratings

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