Homebuilders may shed light on housing recovery

3 stocks will be in the spotlight Thursday as investors try to make sense of the numbers from the sector.

By Benzinga Jul 30, 2014 7:33PM

Image: Aerial view of Houston neighborhood © Ocean/Corbis/CorbisBy Nelson Hem


Leading homebuilders Beazer Homes USA (BZH), Ryland Group (RYL) and Standard Pacific (SPF) will be taking their turns in the earnings spotlight Thursday.


D.R. Horton (DHI), Meritage Homes (MTH) and PulteGroup (PHM) posted mixed results last week, just as the U.S. Department of Commerce announced that new-home sales plunged in June. That made investors nervous about the housing recovery.


Beazer Homes USA

Analysts on average predict that this Atlanta-based builder will report that its revenue for the fiscal third quarter rose more than 14 percent year-over-year to $360.13 million. Earnings of $0.22 per share are also in the consensus forecast. That would compare to a reported net loss of $0.23 per share in the comparable period of last year.


The consensus earnings per share (EPS) estimate dropped two cents on last week's news, and note that estimates range widely from $0.06 to $0.44. In the previous quarter, the net loss was much deeper than expected, but earnings results exceeded analysts' estimates by 16 percent or more in the three periods before that.


During the three months that ended in June, Beazer appointed a new treasurer and reaffirmed its fiscal year net income outlook. It has a market cap of less than $500 million. Note that its return on equity is in the red, and short interest is more than 24 percent of the float, as of the most recent settlement date.


Shares have traded mostly between $18 and $20 since March. The share price is about 24 percent lower than the year-to-date high. The stock has underperformed not only the broader markets over the past six months, but also the other homebuilders featured here as well.


Ryland Group

Per-share earnings from this California-based builder are expected to have tumbled more than 83 percent year-over-year to $0.68. However, second-quarter revenue will total $618.51 million, which would be a gain of more than 25 percent, if analysts are correct.


Analysts overestimated EPS in the first quarter by three cents, or more than six percent. That miss ended a streak of at least three periods of earnings beats. The consensus estimate for the most recent quarter has dropped by two cents in the past 60 days.


During its second quarter, Ryland opened new communities in Maryland, Pennsylvania and Florida. It has a market cap of less than $2 billion and a dividend yield near 0.3 percent. The price-to-earnings (P/E) ratio is less than the industry average, but short interest is more than 14 percent of the float.


The share price is down marginally in the past 90 days and below both the 50-day and 200-day moving averages. It is more than 13 percent lower since the beginning of the year. The stock has underperformed competitors KB Home and Standard Pacific over the past six months, as well as the S&P 500.


Standard Pacific

Per-share earnings of $0.13 and revenue of $563.35 million are anticipated from this Irvine, California-based builder when it shares its second quarter results Thursday morning. That would be up from $0.11 per share and $438.68 million in sales in the same period of last year.


Here, the consensus EPS is the same as it was 90 days ago, and individual estimates range from $0.11 to $0.15. The company missed expectations in the previous quarter by a penny per share, but earnings handily topped analysts' consensus estimates in the three periods before that.


During the three months that ended in June, Standard Pacific acquired the homebuilding operations of Streetman Homes. Standard Pacific has a market cap of more than $2 billion and an operating margin that is greater than the industry average. And its P/E ratio is less than the industry average.


The share price has retreated more than nine percent since the beginning of July, dropping below the 200-day and 50-day moving averages. It is down more than 12 percent year-to-date. The stock has not only underperformed the broader markets over the past six months, but larger rivals Lennar and PulteGroup, too.


At the time of this writing, the author had no position in the mentioned equities.


More from Benzinga

8Comments
Jul 31, 2014 9:54AM
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I sell to the homebuilding industry and my take is that these homebuilders "took it on the shorts" over the past 6-8 years and now that there is a slight uptick in demand for new construction these builders are trying to make up for all their previous losses as quickly as possible knowing that things can slow down again.  Where I live in the south, they are building like crazy both starter homes at around $200K as well as more custom homes from 500K and above.  The homebuilders will tell you the higher prices are due to increase in labor but honestly the majority of the labor building a home today with the exception of plumbing, electrical, HVAC etc. is Hispanic and honestly I don't think they are making much more today than they did before because the homebuilders squeeze them for better pricing.  The homebuilders will tell you that material has gone up dramatically and again that necessarily isn't the truth and all you need to do is walk the aisles of Home Depot or Lowe's to verify that.  Bottom line...the homebuilders have gotten greedy and when we have our next economic collapse which will first be in the stock market then people will lose more jobs and then house prices will fall...we will be starting all over again.  I guess we didn't learn our lesson the last time...   
Jul 31, 2014 10:09AM
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The reality is we need to stop looking in the rear view mirror when we talk about a housing recovery.  There will be no recovery ever again like we have witnessed in the past.  Present policies adopted by our elected representatives have created a deflating compressing economy with pressures that will lower wages and citizens incomes for housing.  With giant inflation going on in consumerables we will see less and less income available for housing.  Nothing ever goes straight up or down but considering the long term macro pressures we should be bearish about any rebound in housing like we have seen in the past.  JMHO
Jul 31, 2014 10:03AM
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first time unemployment claims rise over 300k yet again for a single week.

 

yet obama brags about 230k jobs created in an entire month. 

 

LOL

Aug 1, 2014 9:10AM
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Unemployment rate goes back up this month.

 

"recovery" claims made by obama

Jul 30, 2014 9:16PM
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Nope. Until home builders are building starter homes our youth can afford, we won't see recovery. Building giant homes is sooooo- 20th Century. 
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