Zacks Industry Outlook Highlights: Lennar, KB Home, PulteGroup, Masco and Vulcan Materials - Press Releases

By
A A A
Share |

For Immediate Release

 

Chicago, IL - May 23, 2012 - Today, Zacks Equity Research discusses the U.S. Homebuilders, including Lennar Corporation ( LEN ), KB Home ( KBH ), PulteGroup, Inc. ( PHM ), Masco Corporation ( MAS ) and Vulcan Materials Company ( VMC ).

 

A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/75650/homebuilding-stock-review-outlook-may-2012

 

The average selling prices (ASPs) are improving for most large-cap homebuilders due to changes in the community/product mix. ASPs have gained from increased sales in high-end communities of California, Arizona, Colorado and Florida where home prices are generally higher.

Given the scenario, large builders are taking away share from other undercapitalized small/medium-sized private builders on the back of overall housing demand, stronger capital and better land positions.

Lennar Corporation ( LEN ) strategically focuses on acquiring new home sites that would boost margins and percolate down to the bottom line. The company focuses on high-margin, well-positioned communities and avoids fringe or tertiary markets where price is the only driver. The company's focus on quality instead of quantity is benefiting margins and boosting new sales orders.

KB Home ( KBH ) has started rolling out communities in highly desirable submarkets, which allows it to sell larger, higher-priced homes, driving up the ASP. KB Home is also targeting higher income, first-time and move-up buyers -- all of whom are more inclined toward buying a new home rather than buying a foreclosure.

PulteGroup, Inc. ( PHM ) is continuously evaluating its assets and prioritizing markets and projects in order to appropriately allocate capital. The company is divesting lower-margined projects and exiting non-performing communities which no longer fit in the company's operating strategy. Such a policy frees up cash to invest in other potential opportunities which generate higher returns.

Cost Saving Initiatives

Most housing companies resorted to cost reduction strategies in order to cope with the challenging industry conditions like a sluggish US homebuilding industry and raw material cost inflation. Most of these companies have taken action to improve their operating and financial performance.

PulteGroup made significant workforce reductions and is also aggressively working to reduce overhead costs. In 2011, the company consolidated its field organization and select corporate functions. It also consolidated its regional operations in Arizona, Florida, New York and New Jersey and merged its West and Central area.

Management's concerted efforts to reduce overhead costs pulled down selling, general and administrative (SG&A) expenses substantially in 2011. This subsequently acted as a tailwind for margins. The company is also adjusting the contents of its homes and building smaller floor plans to suit the needs of cash-constrained Americans.

Home improvement products-maker Masco Corporation ( MAS ) took initiatives like business consolidation, system implementations, plant closures, improvement in the global supply chain and headcount reductions to contain costs. These initiatives are expected to result in about $150 million of gross cost reduction before inflation in 2012.

Construction aggregates maker Vulcan Materials Company ( VMC ) has invested in a new Oracle-based ERP and Shared Services platform which allowed the consolidation of the company's eight divisions into four regions. The system also streamlined its support functions, thereby reducing related positions and overhead costs.

The company has also announced two other initiatives: a Profit Enhancement Plan and planned asset sales, in order to improve earnings and cash flows, pay off debts and thereby strengthen its overall credit profile.

The Profit Enhancement Plan is designed to reduce costs as well as enhance profitability by streamlining the management structure over the next 18 months. The plan is expected to improve EBITDA by $100 million on an annual basis by 2014.

Under the planned asset sale, the company plans to divest its non-core assets over a period of 12 to 18 months in order to improve the company's liquidity position and earnings. These sales are expected to generate after-tax net proceeds of $500 million.

Though cost-saving initiatives will hurt earnings in the near term, the overall growth profile of the homebuilding companies will get a boost over the long haul when the housing market fully recovers.

 

 

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2679 .

 

About Zacks

 

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment

Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4581 .

 

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

 

Follow us on Twitter:  http://twitter.com/zacksresearch

 

Join us on Facebook:  http://www.facebook.com/ZacksInvestmentResearch

 

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

 

Media Contact
Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

http://www.zacks.com


 
KB HOME (KBH): Free Stock Analysis Report
 
LENNAR CORP -A (LEN): Free Stock Analysis Report
 
MASCO (MAS): Free Stock Analysis Report
 
PULTE GROUP ONC (PHM): Free Stock Analysis Report
 
VULCAN MATLS CO (VMC): Free Stock Analysis Report
 
To read this article on Zacks.com click here.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: KBH , LEN , MAS , PHM , VMC

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

74,972,696
  • $16.29 ▲ 1.24%
58,110,176
  • $63.0301 ▲ 2.92%
52,113,540
  • $4.30 ▲ 4.37%
45,053,607
  • $26.18 ▲ 3.40%
40,556,519
  • $3.22 ▲ 0.94%
33,697,770
  • $50.83 ▲ 1.90%
33,642,638
  • $4.56 ▲ 2.01%
31,530,460
  • $20.06 ▲ 11.88%
As of 4/22/2014, 04:07 PM