OC is down today on a poor earnings report and guidance. But it's performance should not reflect on the builders!
As I have said in the past, home sales are up and because there are fewer builders today, the surviving builders are getting a larger piece of the pie than in the past. However, the suppliers have not seen a reduction in their ranks as most of them are still in business and managed to get through the bad years with adding debt. It should be no surprise that their performance is less than stellar.
It won't stop a sell off of the builders, but when their earnings come out better than expected, the builders will continue their upward trend.
I heard that OC's problems largely related to YOY negatives due to last years surge in the roofing biz due to all the storms .... in other words .. not housing recovery related ... yet USG getting slammed despite an upgrade.
OC needs new construction to improve. New home sales need to get over 1 million units to get them moving in the right direction. Because the number of builders have decreased by 50%, builders only need around 600,000 units a year.
Most of these suppliers have taken on huge debt or issued more stock to get them through this housing downturn. So these companies need to make more money than they did during the boom to pay for the debt. To make it more difficult, most of these suppliers have the same competitors they had during the boom. USG and National are still out there competing for the limited amount of business.
I think the market just got out ahead of themselves on the suppliers. Most of them are the analyst that want to play the building sector without going into the home builders.