Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell) on Jan 03, 2013 due to a sharp
decline in net order growth in third-quarter fiscal 2013.
Why the Downgrade?
Ryland Inc. has witnessed sharp downward estimate revisions
after reporting third-quarter fiscal 2013 results. Although the
California based homebuilding company reported decent results in
the third quarter fiscal 3013, the sharp deceleration in new
orders concern us.
Rising home prices and the spike in interest/mortgage rates
since May this year slowed down the pace of orders and traffic in
the homebuilding industry. Ryland also faced a sharp fall in
absorption rates of monthly orders per community as the
cancellation rate went up sharply. This was because buyers were
taken unawares by the sudden increase in rates and customers put
off their purchase decision, thereby increasing cancellation
rates and lowering orders
Moreover, there is a possibility of a downward pressure on
margins in 2014 due to its aggressive acquisitions, higher
mortgage rates and diminished pricing power in the slow housing
The housing sector is experiencing a slowdown since May 2013
due to the political uncertainty in Washington, rising home
prices and tight credit availability leading to slowing down of
orders for most homebuilders.
The Zacks Consensus Estimate for 2014 decreased 1.0% to $6.69
per share over the last 60 days. For 2014, most of the estimates
were revised downward over the same time frame, lowering the
Zacks Consensus Estimate by 8.6% to $3.17 per share.
Other Stocks to Consider
Other stocks worth considering in the industrial goods sector
CaesarStone Sdot-Yam Ltd.
James Hardie Industries plc
). While CaesarStone and James Hardie Industries carry a Zacks
Rank #1 (Strong Buy), Gafisa carries a Zacks Rank #2 (Buy).
CAESAR STONE SD (CSTE): Free Stock Analysis
GAFISA SA-ADR (GFA): Free Stock Analysis
JAMES HARDI-ADR (JHX): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
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