AMWD

KB Home’s Outlook for 2025 Better Than Expected

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Image: KB Home’s shares have done well since the beginning of 2023. By Brian Nelson, CFA KB Home (KBH) reported fourth quarter results on January 13 that beat expectations on both the top and bottom lines. Year-over-year, revenues were up 19%, to $2 billion, above consensus of $1.98 billion, while homes delivered increased 17% and average selling price advanced 3%, to $501,000. Homebuilding operating income increased 27% in the quarter thanks in part to a 60 basis-point improvement in its homebuilding operating income margin. KB Home’s housing gross profit margin increased to 20.9% from 20.7% in the same period last year. Financial services pretax income grew 8% in the quarter. Net income rose 27%, while diluted earnings per share increased … Read more

Toll Brothers Ends Strongest Year Ever

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By Brian Nelson, CFA On December 9, luxury homebuilder Toll Brothers (TOL) reported better-than-expected fourth-quarter fiscal 2024 results with revenue and non-GAAP earnings per share coming in higher than the consensus forecasts. Home sales revenues increased 10% in the quarter, while delivered homes were 3,431, up 25%. Net signed contract value was up 32% compared to the same quarter a year ago, with contracted homes of 2,658, up 30%. Backlog value, however, fell 7% on a year-over-year basis, with homes in backlog of 5,996, down 9%. Toll Brothers’ adjusted home sales growth margin, which excludes interest and inventory write-downs, came in at 27.9% in the quarter, below the adjusted home sales gross margin of 29.1% in the fiscal fourth quarter … Read more

Lennar Navigating Fluctuating Interest Rate Environment Well

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Image: Lennar has been a strong performer since the beginning of 2023. By Brian Nelson, CFA On June 17, homebuilder Lennar (LEN) reported better than expected second quarter results for fiscal 2024. Total revenues increased 9%, while diluted earnings per share leapt to $3.45 in the quarter from $3.01 in the same period a year ago. New orders jumped 19%, to 21,293 homes, while the firm’s backlog stood at 17,873 homes with a dollar value of $8.2 billion. Deliveries in the quarter increased 15%, to 19,690 homes. Its average sales price, net of incentives, per home delivered came in at $426,000 in the second quarter, while its homebuilding gross margin was up 10 basis points from last year, to 22.6%. … Read more

Toll Brothers Notes Strong Start to Spring Selling Season

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By Brian Nelson, CFA Back on February 20, luxury homebuilder Toll Brothers (TOL) released first-quarter results for fiscal 2024. Both revenue and GAAP earnings per share came in better than expected. Home sales revenue increased 10% in the quarter from the year-ago period, while delivered homes advanced 6%. Impressively, net signed contract value was up 42% from last year’s quarter, while the number of contracted homes increased 40%. Its backlog fell 18%, to $7.08 billion, however, but the company continues to benefit from higher home sales gross margins. Management’s commentary on the quarter was upbeat in the press release: We are very pleased with our strong first quarter results. We delivered 1,927 homes at an average price of approximately $1.0 … Read more

How Some Members Use Valuentum’s Investment Services

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By Brian Nelson, CFA Thank you for your membership to Valuentum. We serve a wide variety of investors, including dividend growth investors, value investors, and pure Valuentum investors, among others. Many different types of investors and professionals use our research and financial analysis in a whole host of applications from individual stock-selection to the evaluation of closed-end funds to an overlay in a money-management setting and beyond. We wanted to make sure that you know that, if you’re a dividend growth or income investor, that there are others that use our website to utilize the Valuentum process, fair value estimates and other metrics. Similarly, if you’re a practitioner of the Valuentum system, I wanted to make sure that you are … Read more

Home Depot’s Comps, Operating Income Fall in Q4; Hikes Dividend 10%

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Image Source: Mike Mozart By Brian Nelson, CFA  On February 21, home improvement retailer Home Depot (HD) reported weak fourth quarter 2022 results that showed comparable store sales for the period falling 0.3% and operating income dropping 1.5% from the same period a year ago. Diluted earnings per share advanced 2.8% from last year’s quarter. The company is dealing with a weakened consumer spending environment and difficult comparisons from pandemic-driven demand of a year ago. Home Depot raised its dividend payout 10%, to $2.09 per share, or $8.36 per share on an annualized basis. That translates into a forward estimated dividend yield of ~2.6%. Looking to fiscal 2023, Home Depot’s sales guidance was rather weak. The company expects sales and … Read more

Things Are Bad Out There

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“I don’t like this market one bit, but we have to endure. Markets will rise again, but there will be a lot more pain to come in the near term. We think the base case is that we get a very bad recession in 2023. We’ve yet to pull the trigger on put option ideas in the simulated newsletter portfolios, but we expect things to get worse before they get better. For readers seeking ongoing option ideas each month, please consider subscribing to our options commentary here.” – Brian Nelson, CFA By Brian Nelson, CFA Things are bad out there, and there’s probably no better way to say it. On September 28, Bloomberg reported that Apple Inc. (AAPL) is now … Read more

U.S. Housing Market Showing Signs of Weakness

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Image Shown: The US housing market is starting to show signs of weakness. Companies involved in the home building business in the US are starting to feel the heat, with the iShares US Home Construction ETF down ~30% year-to-date as of early September 2022 on a price-only basis. By Callum Turcan The national U.S. housing market has been on fire during the past few years. Sharp increases in U.S. housing prices are now contending with rising mortgage rates, which is prompting the question, are U.S. housing prices heading for a crash? Affordability issues are rampant, with many households now priced out of the market, and signs of weakness are emerging in the U.S. housing market. Background The Federal Reserve is … Read more

ICYMI: Valuentum’s Brian Nelson on the Latest Howard Marks’ Memo: “Something of Value”

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Valuentum’s President of Investment Research Brian Michael Nelson, CFA, explains why there are not really value and growth stocks, why most of the research in quantitative finance is spurious and needs to be redefined on a forward-looking basis, and why enterprise valuation (not the efficient markets hypothesis) should be the organizing principle of finance. Nelson explains his views about valuation, what it means to be a value investor, and investing in the context of Oaktree Capital Howard Marks’ latest memo, “Something of Value,” January 11, 2021. Please don’t forget to give the second edition of the book “Value Trap” a 5-star rating on Amazon here. Thank you for your membership! —– Tickerized for holdings in the IWM. Valuentum members have … Read more

Value Is Not Static and the Qualitative Overlay Is Vital to Our Process

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With prudence and care, the Valuentum Buying Index process and its components are carried out. Our analyst team spends most of its time thinking about the intrinsic value of companies within the context of a discounted cash-flow model and evaluating the risk profile of a company’s revenue model. We have checks and balances, too. First, we use a fair value range in our valuation approach as we embrace the very important concept that value is a range and not a point estimate. A relative value overlay as the second pillar helps to add conviction in the discounted cash-flow process, while a technical and momentum overlay seeks to provide confirmation in all of the valuation work. There’s a lot happening behind the scenes even before a VBI rating is published, but it will always be just one factor to consider. Within any process, of course, we value the human, qualitative overlay, which captures a wealth of experience and common sense. We strive to surface our best ideas for members.