With the iShares Dow Jones U.S. Home Construction ETF (NYSE:
) up nearly 200 percent since October 2011, all the good news has
to be priced into the home builders already, right?
Maybe not, if recent earnings reports have anything to do with
Early Tuesday, D.R. Horton (NYSE:
) reported solid results with earnings up 122 percent from a year
ago to $0.20 a share. Sales rose 41 percent to $1.28 billion. The
results handily beat the Thomson Reuters consensus estimate of
$0.14 a share and sales of $1.1 billion.
While many home builders are too far extended past proper buy
points to consider buying now, D.R. Horton is in a different boat.
It staged a technical breakout in heavy volume Tuesday, soaring
11.8 percent to $23.82.
As of Tuesday's close, was 4.5 percent above a buy point its
recent high of $22.79 -- still within buying range. It's generally
not prudent to chase a stock when it moves more than five percent
past a buy point.
The stock is very liquid with an average daily volume of 5.6
million shares. Volume on Tuesday totaled 22.3 million shares. A
volume surge like this means that a lot of Tuesday's move was
driven by institutional buying.
Meanwhile, after the close Tuesday, Ryland Group (NYSE:
) also reported stout numbers. Earnings surged 833 percent to $0.56
a share while sales jumped 68 percent to $440.1 million, also
nicely above consensus.
The issue with Ryland Group is that it has run a lot already and
needs to consolidate gains before a new buy point emerges. Buy now
and you'd be chasing. The last breakout for Ryland Group was when
it cleared $35.84 in December. Headed into Wednesday, it was 15
percent past the buy point.
Other builders that fall into the "extended" camp are Lennar
), Standard Pacific (NYSE:
) and PulteGroup (NYSE:
Meanwhile, MDC Holdings (NYSE:
) is still in a base and hasn't broken out yet ahead of its
earnings report tomorrow. Meritage Homes (NYSE:
) also reports on Thursday. It closed Tuesday just above a buying
area of $43.02 but volume hasn't come into the stock yet.
It's been a busy week so far of housing data. Earlier this week,
December pending-home sales fell 4.3 percent, but the decline had
more to do with tight supply rather than slack demand.
Yesterday, the S&P/Case Shiller composite index of 20
metropolitan areas rose 0.6 percent in November, mostly in-line
with estimates. Prices rose 5.5 percent from a year ago -- the 10th
straight month where prices have increased -- but prices are still
about 30 percent below a bubble peak in 2006.
Upcoming Builder Earnings
Three more builders will be out with earnings Thursday before
MDC Holdings: Estimate: $0.40, reversing a year-ago loss --
sales +49 percent to $367.6 million.
PulteGroup: Estimate: eps +675 percent to $0.31 sales +19
percent to $1.5 billion.
Meritage Homes: Estimate: $0.42, reversing a year-ago loss --
sales +45 percent to $355.4 million.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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