|Bid||34.48 x 4000|
|Ask||35.17 x 21500|
|Day's Range||34.33 - 35.14|
|52 Week Range||30.56 - 47.20|
|PE Ratio (TTM)||N/A|
|Beta (3Y Monthly)||1.29|
|Expense Ratio (net)||0.35%|
Declining interest rates since mid-November have lifted mortgage applications and home builder sentiment. A positive for the 2019 housing market.
Will Marvin Ellison’s Initiatives Spark a Turnaround for Lowe’s?LOW’s performance Last year was a tough one for home improvement retailers. The SPDR S&P Homebuilders ETF (XHB), which tracks home improvement and furnishing companies, fell
Housing stocks were at the core of the late 2018 turbulence in financial markets, mostly because the things that were killing broader markets (the threat of rate hikes and a slowing economy) are especially large headwinds for housing stocks. The SPDR S&P Homebuilders ETF (NYSEARCA:XHB) peaked in early 2018. Ever since, it has fallen 25%. But, where there's rubble, there's opportunity. Housing stocks actually look attractive here. They have been oversold on overstated concerns regarding the health of the housing market. In reality, the fundamentals underlying the housing sector aren't that bad. They are actually pretty good. Consider the following: * The U.S. consumer is healthy. Despite all the calls for a coming recession, the U.S. consumer is still relatively healthy. The unemployment rate is low. The economy is still adding hundreds of thousands of jobs every month. Labor participation rates are up. Wages are rising. Inflation is checked. Consumer confidence and sentiment are high. Retail sales were robust last holiday season. The personal savings rate is well above its 20 year average. A healthy consumer usually supports a healthy housing market. * Home prices are steadily rising. The S&P/Case-Shiller U.S. National Home Price Index is still rising at a gradual mid single-digit year-over-year rate, the same rate it has been rising at for the past three years, thus indicating that supply-demand fundamentals underneath the housing market remain healthy, stable, and favorable for homebuilders. For comparison purpose, back before the housing crisis in 2007-08, home prices went from double digit growth in 2004-2005 to low single-digit growth in 2006 and negative growth in 2007. * New houses are being built at a steady and sustainable rate. The headlines continue to scream about weak housing starts data, but in the big picture, housing starts remain on a multi-year uptrend since 2008. Granted, the pace of the growth has slowed, but the trend presently looks more like moderation in housing starts than a steep drop off in housing starts. Prior to nearly every recession in history, housing starts volume plummeted heading into the economic slowdown. * We are in a seller's market, but buyers are sticking around. The monthly supply of homes in the U.S. real estate market currently measures 7.4. That is up sharply from where the months supply has hovered over the past several years, and does indicate that we are in a seller's market (usually numbers below 5 indicate a buyer's market, while numbers above 7 indicate a seller's market). But, 7.4 months of supply is only slightly above 7. Leading into prior housing market collapses, that number has usually risen as high as at least 8, but usually 10 or higher. * Home ownership rates are low, and have room to move higher. Last quarter, the home ownership rate in the U.S. was below 65%. In the early-to-mid 2000's, the home ownership rate was closing in on 70%. Thus, today's home ownership rate is well off its highs, implying that the pool of potential buyers is still relatively large. So long as that pool remains large, and the individuals within that pool remain economically healthy, the housing market should be relatively stable. * The Fed is going dovish. The Fed was exceptionally hawkish in late 2018. Their tune has changed dramatically in early 2019. Multiple current and former Fed members have come out and voiced dovish opinions regarding a "wait-and-see" approach to rate hikes, and many have suggested that this rate hike cycle may be over. * Mortgage rates are falling. Thanks to a dovish Fed, mortgage rates across the U.S. are finally falling after consistently and sharply rising for most of the back half of 2018. The 30-Year Fixed Rate Mortgage is around 4.45% today, roughly 45 basis points lower than where it was in mid-November. Falling mortgage rates increase home affordability, and increasing affordability usually sparks demand, especially against the backdrop of low unemployment, rising wages, and a high savings rate. * 7 Stocks to Buy as the Dollar Weakens Overall, the fundamentals underlying the housing market remain strong. Valuations on housing stocks are now anemic. That combination implies a solid opportunity to buy the dip in housing stocks. InvestorPlace - Stock Market News, Stock Advice & Trading Tips ### Housing Stocks Due for a Bounce: LGI Homes (LGIH) Source: Shutterstock One housing stock that looks really good here is LGI Homes (NASDAQ:LGIH). This is a stock which has fallen 30% off its recent highs and trades at a 20% discount to its "normal" valuation (10x trailing earnings, versus 12x average trailing P/E multiple). Yet, LGI just announced record December results that run contrary to the recent 30% decline and 20% valuation discount. As such, estimates and sentiment should move higher, providing a double tailwind for the stock through higher earnings and multiple expansion. Longer term, this is a healthy homebuilder with a history of sustained growth and broad exposure to the U.S. housing sector with operations in 26 markets and 16 states. So long as the housing market remains healthy, LGIH stock should head higher from here. ### Housing Stocks Due for a Bounce: Pulte Group (PHM) Source: Shutterstock Another housing stock that has been overly beaten up is Pulte Group (NYSE:PHM). Pulte Group is big (the nation's third largest homebuilder) with healthy geographic diversity (25 states and nearly 50 major markets) and demographic diversity (30% entry-level buyers, 30% move-up buyers, 15% luxury buyers, and 25% active adult buyers). Because of this broad exposure, Pulte Group truly moves with the U.S. economy. * 10 Growth Stocks With the Future Written All Over Them As stated before, the U.S. economy is actually doing just fine right now, and projects to be just fine for the foreseeable future. PHM stock is not priced for that. Not only has it fallen 20% off recent highs, but it's also trading at under 10x trailing earnings, versus an average trailing P/E multiple of over 12. Thus, so long as the economy continues to stabilize in 2019, PHM stock should rebound. ### Housing Stocks Due for a Bounce: NVR (NVR) Source: Jan Tik via Flickr A large housing stock which looks attractive on this dip is NVR (NYSE:NVR). NVR is a big homebuilder that operates in 14 sates and 31 metropolitan areas. The company's home building operations also span multiple income demographics. As such, given broad exposure to the housing market, stabilization in housing market fundamentals through an indefinite rate hike pause should propel NVR stock higher. If that does happen, NVR stock has plenty of room to run. NVR stock has fallen 30% off its recent highs. More than that, this stock normally trades around 20x trailing earnings. Today, it trades at just 15x trailing earnings. Thus, multiple expansion through improved sentiment could send shares materially higher. ### Housing Stocks Due for a Bounce: Lennar (LEN) Source: Shutterstock One housing stock which has been really beaten up is Lennar (NYSE:LEN). Much like the other homebuilders on this list, Lennar is big with healthy geographic and demographic diversity. But, LEN stock has been chopped down worse than most of its peers. As of this writing, the stock trades nearly 40% off recent highs. * Top 10 Global Stock Ideas for 2019 From RBC Capital This compression provides a big upside opportunity in 2019. If housing market fundamentals continue to stabilize, sentiment surrounding LEN stock will improve dramatically. That will lead to huge multiple expansion. Normally, LEN stock trades around 15x trailing earnings. Today, it trades at about half that level, around 8x trailing earnings. Thus, this stock could easily almost double from here if valuation simply reverts to the norm. ### Housing Stocks Due for a Bounce: D.R. Horton (DHI) Source: -v via Flickr (modified) The number one homebuilder in America by closings volume -- D.R. Horton (NYSE:DHI) -- also looks good on this dip. The fundamentals here are good. DHI is the biggest homebuilder in America and has been so for almost two decades. The company has broad geographic and demographic diversity, and controls dominant market share in rapidly expanding metro areas like Phoenix and Dallas Fort Worth. Fiscal 2018 was a good year, with healthy sales and closing growth and 20%-plus ROI. If these fundamentals persist in 2019 -- and they should -- then DHI stock will rebound in a big way. This stock is already more than 25% off its recent highs. It is also trading at just 10x trailing earnings, versus a five-year average trailing multiple of 15. Thus, multiple expansion and stabilized EPS forecasts could drive huge gains for DHI stock in 2019. ### Housing Stocks Due for a Bounce: KB Home (KBH) Source: Shutterstock The housing stock that was hit hardest in 2018 was KB Home (NYSE:KBH). Due to deterioration it its core operating results as a result of macroeconomic headwinds, KBH stock struggled throughout 2018. But, those macroeconomic headwinds are improving, and the company just reported fourth-quarter numbers that were largely better than expected and confirm a "less bad" macroeconomic backdrop. * 7 Oversold Small-Cap Stocks With Massive Profit Growth But KBH stock isn't priced for "less bad". It's priced for "more bad". KBH has plunged nearly 50% off its January 2018 highs, and trades at just 12x trailing earnings, versus a five-year average trailing P/E multiple of 15. Estimates have also come down sharply over the past several months. Thus, through a combination of multiple expansion and higher EPS revisions, KBH stock could soar in 2019. ### Housing Stocks Due for a Bounce: Toll Brothers (TOL) Source: Shutterstock The final beaten up housing stock on this list is Toll Brothers (NYSE:TOL). Due to rising home prices and mortgage rates, Toll Brothers shocked investors in early December by reporting its first decline in new orders in 4 years. That essentially confirmed a housing market slowdown, and kept bears in control of TOL stock. But, mortgage rates are now starting to fall, and that could provide a nice lift to beaten-up TOL stock. After all, this stock trades at just 7x trailing earnings. That's super cheap, even for a housing stock. It's also well below the stock's average trailing P/E of 17. Plus, 2019 EPS estimates have come down more than 10% in the past 90 days alone, implying that next year's numbers look beatable. Overall, successive EPS beats plus multiple expansion could drive huge gains for TOL stock in 2019. As of this writing, Luke Lango was long XHB, LGIH, KBH, and TOL. ### More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Growth Stocks With the Future Written All Over Them * 7 Reasons Why Buffett's Bet on Apple Stock Is a Good One * 10 Companies That Could Post Decelerating Profits Compare Brokers The post 7 Beaten-Up Housing Stocks Due for a Bounce Back appeared first on InvestorPlace.
Investors are just starting to appreciate the serious economic implications from a prolonged partial shutdown of the U.S. government. In fact, JPMorgan Chase CEO Jamie Dimon has warned that U.S. GDP could be reduced to zero in the first quarter if this partial shutdown continues significantly longer. Also, amid fears of a lapse in paychecks to government workers, more attention has been focused on the fact that four out of five U.S. workers live without a savings safety net.
Housing stocks, which have rebounded this year with the market, are still far off their one-year highs and could continue to plunge even further as the fundamentals of the U.S. housing industry weaken.
Last year was tough for home improvement retailers, including Home Depot (HD), whose stock price fell 9.3%. The stock fell despite Home Depot beating analysts’ EPS expectations in the first three quarters of 2018, as investors grew skeptical about increased interest rates and the weak housing market. Weakness in broader equity markets—the S&P 500 fell 6.2%—didn’t help, either.
Bed Bath & Beyond Gives Optimistic Fiscal 2019 EPS Guidance ## Third-quarter performance Bed Bath & Beyond (BBBY) posted its third-quarter earnings of fiscal 2018 after the market closed on January 9. For the quarter ended on December 1, the company posted adjusted EPS of $0.18 on revenues of $3.03 billion. Year-over-year, the company’s revenue increased by 2.6%, while its adjusted EPS declined by 59.1%. ## Stock performance During the quarter, Bed Bath & Beyond outperformed analysts’ EPS expectation of $0.17 but fell short of revenue expectations of $3.04 billion. The company’s SSSG declined by 1.8% during the quarter, while analysts were expecting the company’s SSSG to fall by 0.3%. Although BBBY failed to meet analysts’ sales estimates, the company’s stock price rose 16.8% in the aftermarket trading hours on January 9 due to optimistic 2019 EPS guidance provided by the company’s management. During the earnings call, BBBY’s management stated that it’s ahead of the scheduled plan in achieving its long-term financial goals, and expects the company’s EPS for 2019 to be around $2.0, which was higher than analysts’ expectations. Analysts had forecasted BBBY’s EPS to decline by 21% in fiscal 2019. The higher-than-expected 2019 EPS guidance appears to have increased investors’ confidence, leading to a rise in BBBY’s stock price. ## Year-to-date stock performance Last year was tough for BBBY with its stock price losing 48.5% of its value. However, the company has started 2019 on a strong note. As of December 9, the company’s stock has returned 8.3% since the beginning of 2019. During the same period, peers Williams-Sonoma (WSM) and RH (RH) have returned 6.1% and 9.6%, respectively. The SPDR S&P Homebuilders ETF (XHB), which has invested ~21% of its holdings in home improvement and furnishing companies, has returned 8.9% YTD. ## Series overview In this series, we’ll look at BBBY’s performance in the third quarter of fiscal 2018 and compare it with analysts’ expectations. We’ll also cover management’s guidance for fiscal 2018 and fiscal 2019. Let’s start by looking at BBBY’s third-quarter revenue. Continue to Next Part Browse this series on Market Realist: * Part 2 - What Drove Bed Bath & Beyond’s Revenue in Q3? * Part 3 - Why Did Bed Bath & Beyond’s Q3 Net Margin Decline? * Part 4 - Bed Bath & Beyond Beat Analysts’ EPS Expectations in Q3 2018
Lennar Corp. reported Wednesday a fiscal fourth-quarter profit that beat expectations, but revenue, deliveries and new orders that came up a bit short. The homebuilder's stock was still inactive in premarket trade. Net earnings for the quarter to Nov. 30 rose to $796.1 million, or $2.42 a share, from $309.6 million, or $1.29 a share, in the same period a year ago. Excluding non-recurring items, adjusted earnings per share came to $1.96. The FactSet EPS consensus was $1.93. Total revenue increased 71% to $6.46 billion, but was just below the FactSet consensus of $6.48 billion. Home deliveries rose 64% to 14,154, below the FactSet consensus of 14,482, while the average price of homes delivered grew 8.8% to $421,000, but missed expectations of $419,680. New orders increased 44% to 10,611 homes, below the FactSet consensus of 11,213, while the average price of new orders increased 3.1% to $421,000, topping expectations of $412,020. "We continue to believe that the housing market is adjusting to a temporary disconnect between sales prices and buyer expectations and that the basic underlying fundamentals of low unemployment, higher wages and low inventory levels remain favorable," said Executive Chairman Stuart Miller. The stock has lost 3.2% over the past three months, while the SPDR S&P Homebuilders ETF has declined 4.2% and the S&P 500 has shed 10.6%.
Will 2019 Be Better for Home Depot and Lowe’s? The higher interest rate and the weak housing market have led to a fall in home improvement retailers’ stock prices. Lowe’s (LOW) reported its third-quarter earnings on November 20.
Investing.com - Homebuilders were building up momentum Tuesday, buoyed by positive U.S. housing data and expectations the Federal Reserve will rein in its outlook on rate hikes.
The average U.S. 30-year mortgage rate has fallen to a two-month low as investors rush to safe haven amid market decline, putting homebuilder ETFs in focus.