Lennar Beat Puts Homebuilders In Focus Ahead of Data (LEN, BZH, MHO, KBH, PHM, TOL, MTH, RYL)

Tickerspy’s Homebuilder Index

HOMEBUILDER INVESTING IDEAS

• Popular long ideas: HOV, PHM, LEN
• Popular short ideas: DHI, PHM, KBH
• Top dividend plays: XIN, KBH, LEN
• Pro favorites: LEN, DHI, NVR

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HOMEBUILDER COVERAGE

These firms typically focus on the residential markets, building, homes, condos, and apartment buildings

• Surging New Home Sales Lift Homebuilders Stocks (CVCO, NVR, BHS, BZH, HOV, KBH)
• Homebuilders Surge on Pending Sales Data (HOV, PHHM, LEN, MTH, RYL, NVR, DHI, TOL)
• Homebuilders Rally Despite Data (BHS, MTH, XIN, PHHM, PHM, RYL)

HOMEBUILDER CHART

HOMEBUILDER METRICS

Avg. Market Cap:	$3.0B
Avg. P/E Ratio:	21.6
Avg. Div Yield:	0.3%

Homebuilders took a hit last week after bearish foreclosure data stoked fears of a continued housing slump, but Lennar (LEN) rebounded on Monday after better-than-expected fiscal third-quarter earnings. The company recorded net income of $30 million or 16 cents per share for the quarter ended August 31, compared to a loss of -$171.6 million or -97 cents a share in the same period last year. Revenue rose by 14% to $825 million. The results easily topped analysts’ expectations for a nickel in EPS on $777.5 million in revenue.

Despite a -15% decline in new orders and a -12% backlog reduction, Lennar CEO Stuart Miller said, “we are optimistic that our core businesses are on the right track to achieving sustainable profitability as the housing market recovers.” It will be interesting to see whether this week’s housing data gives the bulls more to chew on — August housing starts data and building permits are due tomorrow morning, followed by existing home sales on Thursday and new home sales on Friday.

As a whole, the Homebuilder Stocks Index fell across the board last week with Beazer Homes USA (BZH), M/I Homes (MHO), and KB Home (KBH) among laggards, slipping by -7% or more.

Earlier this month, Barron’s noted homebuilder optimism from Citigroup analyst Josh Levin, who told the newspaper, “There’s a lot of bad news already priced in.” Levin likes PulteGroup Inc (PHM), Toll Brothers (TOL), and Beazer among sector components, and he noted that Meritage Homes (MTH) and Ryland Group (RYL) could takeover candidates amid attractive valuations.

Keybank started Lennar at Buy with a $20 price target on September 10. The stock has hit a rough patch since the initiation, but traders will be watching to see if shares can maintain some momentum from today’s earnings rally.

As for the sector as a whole, investors can track the Homebuilder Stocks Index for performance trends and a suite of other metrics at tickerspy.com.

Tags: BZH, KBH, LEN, MHO, MTH, PHM, RYL, TOL