TOL

Toll Brothers Sees Leveling of Demand But Outlook Remains Strong

by

On Tuesday, one of the largest luxury homebuilders in the US, Toll Brothers (TOL) released its results for the fiscal fourth quarter (ended October 31, 2013). Revenue growth and unit delivery expansion were fantastic, up 65% in dollars and 36% in units compared to the prior-year quarter. Net signed contracts of $839 million and 1,163 units rose 23% in dollars and 6% in units compared to last year’s period, while on a per-community basis, the fourth quarter witnessed net signed contracts per community (5.17) that was the highest for any fourth quarter since 2005. Backlog of $2.63 billion and 3,679 units rose 57% in dollars and 43% in units compared to the year-ago mark. The average price of homes delivered … Read more

Housing, Hormel and Hewlett-Packard

by

Tuesday brought about a nice S&P/Case-Shiller number and better-than-expected quarterly performance from Hormel Foods and Hewlett Packard. Though we liked the news, firms in our Best Ideas portfolio and Dividend Growth portfolio represent our best ideas at any time. Housing From press release: “Data through September 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed that the U.S. National Home Price Index rose 3.2% in the third quarter of 2013 and 11.2% over the last four quarters. In September 2013, the 10- and 20-City Composites gained 0.7% month-over-month and 13.3% year-over-year.” To continue reading >> Homebuilders: DHI, GFA, JOE, KBH, LEN, MDC, MTH, NVR, PHM, RYL, SPF, … Read more

Homebuilders Report Nice 3Q; We’re Not Putting New Money to Work in Them

by

We’ve seen the recent hike in interest rates put a moderate dent in the upward trajectory of performance at Lennar (LEN) and KB Home (KBH) in their respective third quarters. This was also the case in PulteGroup’s (PHM) and M/I Homes’ (MHO) third quarter performance, which we will outline in this piece. However, recent trends in the average 30-year fixed rate, which hit a four-month low last week, may make fourth-quarter performance a bit better for the group than originally anticipated. Still, we’re not putting new money to work in the industry at this time on the basis of valuation. PulteGroup On Thursday, PulteGroup reported decent third-quarter results that showed strong revenue, growth, home selling-price expansion, and solid margin performance. … Read more

Third Quarter Results at Lennar and KB Home Were Resilient

by

We were hit with a flood of housing data during the past week, with two of the nation’s largest homebuilders posting decent third-quarter results. Recent data also revealed a continued upward trajectory in home prices across the US. Let’s dig into the developments. Housing Price Improvements The S&P/Case Shiller 20-City Composite Home Price Index (1) increased 1.84% sequentially to 162.49, revealing that housing prices have now finally recovered to 2004 levels. The pace of expansion is off slightly from the previous sequential month’s rate of 2.2% growth, but we do not believe the slight slowdown in the rate of growth is enough to draw any significant conclusions with respect to the pace of the upward trajectory. All of the 20 cities measured in the index showed … Read more

Why Valuation (Still) Matters: The Homebuilders

by

At Valuentum, our stock-selection methodology blends two long-time investing foes—value and momentum (click for why this combination is so powerful). For an idea to fit the profile of a ‘Valuentum stock’, it simply cannot just be undervalued, nor can it exclusively possess fantastic momentum and technical measures. The firm must have both characteristics and pass the qualitative muster of our analyst team to make the cut for addition to our actively-managed portfolios. We credit the Valuentum discipline as the major driver behind the significant outperformance in our portfolios. In addition to highlighting one of the biggest industry collapses during the year (the mREITs—click here) and perhaps the biggest alpha trade (stock up, market down) of the year (Apple recently), the Valuentum process … Read more

Positive US Housing Data Persists; The Recovery is Real

by

Through the course of this week, we’ve received a number of positive data points suggesting the US housing recovery is well on its way. Long-time Valuentum members know that we’ve been very bullish on the housing turn since early 2012 (view the January 2012 edition of our Best Ideas Newsletter here). The S&P/Case-Shiller Index kicked off the week’s events with a 12% year-over-year price increase in the 20-city composite index for April (there’s a two month lag in the data). The 10-city index also rose 11.6% year-over-year. Both metrics have recovered to 2004 levels, but both remain well below the 2007 all-time (“bubble”) highs. Image Source: S&P Dow Jones Indices Image Source: S&P Dow Jones Indices We were also very … Read more

Toll Brothers’ Fourth Quarter Results Were Fantastic

by

Tuesday morning, one of the nation’s premier homebuilders, Toll Brothers (click ticker for report: ) reported spectacular fourth quarter results. Revenues surged 48% year-over-year to $632.8 million, well ahead of consensus expectations. Earnings per share jumped to $2.35 per share from $0.09 a year ago thanks to the release of deferred tax assets. Pretax income jumped nearly 300% year-over-year to $60.7 million. Key metrics for Toll’s business were mostly strong across the board. Net signed contracts in the fourth quarter jumped 70% year-over-year to 1,098 units, with a 75% surge in value to $684.1 million. The firm’s backlog jumped 54% to 2,569 units, with the value of that backlog increasing 70% to $1.67 billion. Stronger pricing also helped gross margins … Read more

The US Housing Market Is Back

by

The housing market in the United States has regained its footing and looks poised to rebound even further. First, on Thursday, PulteGroup (click ticker for report: PHM) reported better-than-expected second-quarter earnings, generated 15% revenue growth, and showed that its backlog grew 31% year-over-year on a unit basis. Then, on Friday, D.R. Horton’s (click ticker for report: DHI) fiscal third-quarter results revealed its backlog advanced 25% year-over-year. Plus, the firm reversed a tax-asset write-down, indicating the company expects increased profitability down the road. The strong performance from these two builders was preceded by solid results from other builders including KB Home (click ticker for report: KBH) and Lennar (click ticker for report: LEN). Though conventional wisdom may suggest a weak economic … Read more