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Beazer Homes USA Inc. Message Board

mark_z_1 2 posts  |  Last Activity: Nov 23, 2014 3:04 PM Member since: Feb 23, 2000
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  • Do not be misled by posts comparing HOV to BZH. The Balance Sheet is the issue with HOV.

    HOV’s “over debt”, combined with a mountain of Preferred Stock standing between earnings and the common stock, is the issue.

    BZH has $ 1.5 B in debt, $ 1.5 B in inventory, and $ 387 M in cash . BZH effectively borrows money at 7% and turns it into a 22% return (margin) by building homes. 100% of that return goes to shareholders (after SG&A).

    HOV (July 31) had ~ $ 1.7 B in debt, $ 1.4 B inventory, $ 190 M in cash, and an annualized interest expense of ~ $ 142 Mil.

    As if that were not bad enough, HOV has a mountain of preferred stock ( see HOVNP), which is paid with expensive after tax dollars, before any remaining scraps can go to common shareholder. BZH has no preferred stock.

    As for the future, I can see BZH going from its anticipated 2015 interest expense of $ 35 M to zero by Y/E 2016 as the last of their expensive debt gets off loaded or goes above the line ( i.e. refi the $ 235 M 2019 9 1/8% notes in 2015, pay off the $ 173 M 2016 8 1/8% notes from cash in 2016, as well as the ongoing move of interest into inventory based on revenue increases). The point being, good balance sheet management
    alone will eventually provide an additional $ 1 in EPS for BZH shareholders.

    Sentiment: Buy

  • The BZH earnings webcast (posted on their website) provides guidance for 2015 revenue growth in the mid teens, a margin of 22%, SGA of 12.5% , and 35 mil. interest expense.

    Using a 2015 revenue estimate of 1.6 Bil., applying their expense guidance, and adding depreciation/amortization at the $ 13 m annual run rate translates into a net income of $ 104 million or $ 3.12 per share.

    Since they have a $ 440 mil. tax loss carry forward, there should be no tax.

    The only unusual expense in 2015 may be a debt extinguishment expense to refi the $ 230 million of May 2019 9 1/ 8% notes. Even if that costs $ 15 mil, the EPS would only drop to $ 2.70.

    Using an 18 P/E valuation multiple would put the stock price at $ 48 per share at Y/E 2015.

    Can someone please double check my math.

    Also, if my math is correct, can someone please explain to me why the two big low ballers ( JP Morgan at $ 18.50 and Citigroup at $ 19) are doing so? I have to believe they know how to do math, so what are their motives for low balling the stock price?

    Sentiment: Buy

16.63-0.2000(-1.19%)Jan 23 4:00 PMEST

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