The housing market has remained red hot amid the COVID-19 pandemic thanks to a near-zero interest-rate environment and a rising demand for bigger and better living spaces in suburban areas to make living and remote working more practical and comfortable. Because the work-from-home trend is expected to continue even in the post-pandemic world–given its benefits for employees and employers–the demand for new houses is not expected to decline any time soon…
The NAHB housing market index in the United States edged up 1 point to 83 in April 2021. The demand for single-family houses has increased significantly. According to the Census Bureau, the sale of new single-family houses increased to its peak since 2006 in March to a seasonally adjusted 1.021 million annual rate, up 21% from February 2021. Given the favorable industry backdrop, investors are rewarding homebuilding stocks, as evidenced by the SPDR S&P Homebuilders ETF’s (XHB) 16.8% gains over the past three months compared to the SPDR S&P 500 ETF Trust’s (SPY) 6.1% returns.
So, we think it could be wise to bet on established homebuilding companies Lennar Corporation (LEN – Get Rating), PulteGroup, Inc. (PHM – Get Rating),Tri Pointe Homes, Inc. (TPH – Get Rating), and Century Communities, Inc. (CCS – Get Rating). We believe they are well positioned to capitalize on the industry tailwinds.
Lennar Corporation (LEN – Get Rating)
One of top players in the homebuilding space, LEN operates primarily under the Lennar brand. The company’s segments include Homebuilding East, Homebuilding Central, Homebuilding Texas, Homebuilding West, Financial Services, Multifamily, and Lennar other. It also offers residential mortgage financing, title insurance, and closing services for home buyers and others.
LEN’s $5.33 billion in net sales for its fiscal first quarter, ended February 28,represents an 18.2% year-over-year rise. The company’s net income increased 151.3% year-over-year to $1.00 billion. Moreover, LEN’s EPS came in at $3.20, up 152% year-over-year.
For the current quarter, ending May 31, analysts expect LEN’s EPS to come in at $2.36, which represents a 43% year-over-year increase. It also surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive. The company’s revenue is expected to increase 13.8% year-over-year to $25.59 billion in fiscal 2021.
In March, LEN announced the formation of its Upward America Venture. The platform is expected to acquire single family homes for rent in high growth markets across the United States. The initiative is expected to help LEN expand its market reach. The stock has gained 104.5% over the past year to close Friday’s trading session at $99.71.
It’s no surprise that LEN has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has a B grade for Sentiment, Quality and Momentum. Click here to see LEN’s ratings for Value, Stability and Growth as well.
LEN is ranked #6 of 25 stocks in the B-rated Homebuilders industry.
PulteGroup, Inc. (PHM – Get Rating)
Having delivered roughly 750,000 homes throughout the United States, PHM ranks as the nation’s 3rd largest homebuilder, with operations across more than 40 major cities. The company offers a wide range of home designs that include single-family detached, townhouses, condominiums and duplexes through its brands Centex, Pulte Homes, and Del Webb, among others. It operates through two segments—Homebuilding and Financial Services.
For the first quarter, ended March 31, PHM’s total revenues were $2.73 billion, up 18.9% from the prior-year quarter. The company’s net income came in at $304.11 million, which represents a 49.3% increase from the same period last year. Its EPS increased 52% from prior-year quarter to $1.14.
The company’s EPS for the quarter ending September 30, 2021 is expected to increase 44.8%from prior-year quarter to $2.23. Also, PHM surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to be…
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