On Jul 2, Zacks Investment Research upgraded
MDC Holdings Inc.
) to a Zacks Rank #1 (Strong Buy) on the back of growing momentum
in the homebuilding market and a bright industry outlook for the
Why the Upgrade?
MDC Holdings is benefiting from the increase in demand for new
homes, a fact supported by most of the housing data released
The housing market has seen significant upside in new home
construction activity, which is fueled by the increase in demand
for new homes. Despite recent increase in mortgage rates, the
housing market continues to witness momentum, indicating stable
recovery. Increased affordability due to higher rentals is
boosting demand. Supply, however, remains limited due to low
inventories, both for new and existing homes. Home prices have
thus moved up sharply with increased market demand and limited
Most homebuilders like MDC Holdings are thus, witnessing
increasing traffic levels due to heightened consumer demand.
Majority of the companies are witnessing significant growth in
both volumes and average selling prices. MDC Holdings has
recorded high double digit earnings surprises for the past seven
quarters. Its average surprise for the past four quarters is
The strong housing momentum has also been reflected in MDC
Holdings' solid first quarter results (ended Mar 31) reported on
May 2, 2013. Its first quarter fiscal 2013 adjusted earnings per
share and total revenue beat the Zacks Consensus Estimate and the
prior-year quarter levels by a wide margin. The beat was driven
by high double digit year-over-year growth in new home orders,
backlogs, home closings and margin expansion. The company was
also able to increase average selling price of the homes sold by
MDC Holdings is due to report its fiscal second quarter 2013
results in late Jul/early Aug. The Zacks Consensus Estimate at
the moment is pegged at 55 cents per share. With a strong Zacks
Rank and Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) of 12.73%, MDC Holdings is likely to beat the Zacks Consensus
Estimate in fiscal second quarter 2013.
Other Stocks to Consider
Other stocks in the homebuilding sector that are performing
well and deserve a mention include
D. R. Horton Inc.
), all carrying a Zacks Rank #1 (Strong Buy).
D R HORTON INC (DHI): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
MDC HLDGS (MDC): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
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