Taylor Morrison's Solid Run on the Bourses Likely to Continue
Taylor Morrison Home Corporation’s TMHC shares have gained significantly in the past three months, despite being hurt by the coronavirus outbreak. The stock has gained 103.2% in the said time frame compared with the Zacks Building Products - Home Builders industry and Zacks Construction sector’s 61.6% and 37.4% rally, respectively.
Taylor Morrison has a solid Momentum Score of B. The score primarily focuses on price and earnings momentum, and indicates the right timing to enter a stock. Investors should buy stocks with a Zacks Rank #1 or 2 (Buy) and a Momentum Score of A or B as these boost the probability of success.
Notably, the consensus mark for 2020 earnings has moved 1.7% upward in the past seven days, reflecting analysts’ optimism about the company’s potential to generate future profits. Notably, in 2021, its earnings are likely to grow 71.6% year over year.
The company — which currently holds a Zacks Rank #1 (Strong Buy) — has been reaping benefits from focus on entry-level, first-time and move-up, as well as luxury and active adult buyers. Also, it operates under three big brand names — Taylor Morrison, Darling Homes, and William Lyon Signature.
Moreover, its strategies to boost profitability through a new website bode well. Despite the recent market slowdown, owing to various restrictions implemented by authorities to restrict the virus spread, the company has improved digital retail experience.
Let’s delve into the factors that might be driving investors’ sentiments and aiding it to generate profits despite the headwinds. You can see the complete list of today’s Zacks #1 Rank stocks here.
Business Initiatives to Mitigate COVID-19 Impact: Taylor Morrison has a trend of generating improved profits backed by various strategic initiatives. The company’s impressive surprise history is a testimony to the fact. Its earnings surpassed the Zacks Consensus Estimate in 13 of the trailing 14 quarters. The trend is likely to continue in the near term, following solid monthly sales orders in June. (Read more: Taylor Morrison Shares Up 17% on Record June Sales)
The company has been witnessing solid demand post the withdrawal of the pandemic-led restrictions, especially from first-time buyers. Moreover, move-up buyers have represented the most consistent behaviors during the first quarter, with steady sales and low cancellations, followed by first-time buyers.
Additionally, it has an exclusive partnership with Christopher Todd Communities — a growing Phoenix-based developer of innovative, luxury rental communities — to operate a “Build-to-Rent” business. Currently, it has two projects under development in Phoenix, with construction activity planned for late summer and early fall, respectively, with occupancy in early 2021.
In addition to the focus on buyers market, it has been building homes on a spec basis, which means a new property is finished or nearly completed, before it is sold. Also, it reduced the average selling price or ASP for homes to address the needs of millennials and baby boomers who want affordable homes and highly-desirable communities. In fact, it has been witnessing good traction at lower price points.
Acquisition & Geographical Expansion: Acquisitions are an important part of Taylor Morrison’s growth strategy. The acquisition of William Lyon Homes — a national homebuilder and developer — on Feb 6 enabled the company to expand geographic scope in all the three major markets — Washington, Oregon and Nevada.
Also, it acquired Urban Form Development, LLC, which primarily develops and constructs multi-use properties like combinations of commercial space, retail, as well as multifamily units.
Cheaper Than Peers: Taylor Morrison, which share space with D.R. Horton, Inc. DHI, PulteGroup, Inc. PHM and Toll Brothers, Inc. TOL in the same industry, has a trailing 12-month Price to Earnings ratio of 7.47 compared with the industry’s 10.63. This shows that the stock is cheaper than the industry peers.
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