Beazer Homes Wins An Upgrade, Outshines Peer Homebuilders

Wedbush upgraded shares of Beazer Homes USA, Inc. BZH, citing its belief that homebuilders will benefit from the loosening of credit standards at Federal National Mortgage Association FNMA.

Analyst Jay McCaniess also believes Beazer Homes will benefit from its focus on entry-level consumers, who benefit the most from lower lending standards. The analyst noted Beazer's entry-level focus is the second highest in his homebuilder coverage, lagging behind only LGI Homes Inc LGIH.

Low Lending Standards To Help

With expectations that the Fannie's debt to income requirement will be relaxed to a 50-percent cap from 45 percent, the analyst believes demand would be spurred, given that first-time homebuyers bring more debt and less equity.

Falling Mortgage Rates A Catalyst

Additionally, Wedbush sees the low mortgage rates as a potential catalyst for Beazer Homes. The firm noted that the national 30-year mortgage rates have fallen to about 4 percent after the post-election spike.

Thus far in 2017, the firm noted that the company has played out to its expectations laid out in December 2016 that 2017 would be a rebuilding year for the community count, with reduced emphasis on debt reduction.

Specifically, the firm expects net community growth of 4.1 percent year-over-year in 2018 versus a flat comp in 2017. The firm also believes the company's recent emphasis on more speculative homes per community should help a 7-percent growth in orders in 2018 compared to its estimate for 2.5-percent comps in 2017.

As such, Wedbush upgraded shares of Beazer Homes to Outperform from Neutral, while it maintains its price target at $15.

At last check, shares of Beazer were up 3.9 percent at $12.79.