Zacks Investment Research upgraded
Ryland Group, Inc
) to a Zacks Rank #1 (Strong Buy) on Jul 6. Share price surged on
the back of a strengthening homebuilding market and a bright
outlook for the year.
Why the Upgrade?
Stocks of homebuilders like Ryland,
D.R. Horton, Inc.
) have rallied strongly since mid-2012 as the U.S. housing market
has seen significant upside in new home construction activity.
The housing market has steadily made a comeback from the lows
witnessed in mid-2006 caused by the severe and widespread
Despite recent concerns over rising interest rates, U.S. home
demand is increasing as increased rentals and historically low
mortgage interest rates have improved the affordability of homes.
Moreover, a sense of urgency to buy a new home before interest
rates shoot up further is also pushing up demand. However, supply
remains limited by low home inventories, both for new and
existing homes. Home prices have thus moved up sharply with
market demand gaining momentum and supply remaining limited.
Large homebuilders like Ryland are thus witnessing increasing
traffic levels due to heightened consumer demand. Most
homebuilding companies are witnessing significant growth in both
volumes and average selling prices.
Ryland's first quarter fiscal 2013 earnings of 43 cents per
share increased significantly from the year-ago loss of 7 cents.
Ryland's revenues in the quarter surged 73.6% year over year on
the back of an increase in homebuilding revenues. More
importantly, new orders jumped 54.4%, while backlog rose 57.2%.
The average backlog price rose 15.6% to $289,000.
In fact, Ryland has beaten the Zacks Consensus Estimate in all
the past four quarters with an impressive average earnings
surprise of 26.29%. Housing market recovery along with Ryland's
excellent fundamentals and its aggressive land acquisition
strategy is driving the share price higher. Ryland has been
aggressively buying land and has invested nearly $1 billion for
this purpose over the last 2 years. We believe its significant
land positions, broad geographic and product diversity and a
better capital position will enable it to take maximum advantage
of the housing recovery.
D R HORTON INC (DHI): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
PULTE GROUP ONC (PHM): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
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