Looking back on home builders stocks’ Q3 earnings, we examine this quarter’s best and worst performers, including Lennar (NYSE:LEN) and its peers.
Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials.
The 11 home builders stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 99.9% below.
In light of this news, share prices of the companies have held steady as they are up 2.7% on average since the latest earnings results.
Lennar (NYSE:LEN)
One of the largest homebuilders in America, Lennar (NYSE:LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.Lennar reported revenues of $9.42 billion, up 7.9% year on year. This print exceeded analysts’ expectations by 2.8%. Despite the top-line beat, it was still a softer quarter for the company with a significant miss of analysts’ adjusted operating income estimates.
Stuart Miller, Executive Chairman and Co-Chief Executive Officer of Lennar, said, "We are pleased to report another solid quarter backed by an economic environment that remains very constructive for homebuilders. Employment was strong, housing supply remained chronically short due to production deficits of over a decade, and demand was solid driven by strong household formation. Although affordability continued to be tested during the quarter, purchasers remained responsive to increased sales incentives, resulting in a 16% increase in our deliveries and a 5% increase in our new orders year over year. "
Unsurprisingly, the stock is down 9.4% since reporting and currently trades at $174.39.
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Best Q3: Skyline Champion (NYSE:SKY)
Founded in 1951, Skyline Champion (NYSE:SKY) is a manufacturer of modular homes and buildings in North America.Skyline Champion reported revenues of $616.9 million, up 32.9% year on year, in line with analysts’ expectations. The business had an exceptional quarter with an impressive beat of analysts’ sales volume and EBITDA estimates.
The market seems happy with the results as the stock is up 13.1% since reporting. It currently trades at $102.82.
Weakest Q3: D.R. Horton (NYSE:DHI)
One of the largest homebuilding companies in the U.S., D.R. Horton (NYSE:DHI) builds a variety of new construction homes across multiple markets.D.R. Horton reported revenues of $10 billion, down 4.8% year on year, falling short of analysts’ expectations by 1.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.
D.R. Horton delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 6.4% since the results and currently trades at $168.74.
TopBuild (NYSE:BLD)
Established in 2015 following a spinoff from Masco Corporation (NYSE:MAS), TopBuild (NYSE:BLD) is a distributor and installer of insulation and other building products.TopBuild reported revenues of $1.37 billion, up 3.6% year on year. This number missed analysts’ expectations by 1.5%. It was a slower quarter as it also produced full-year EBITDA guidance missing analysts’ expectations.
TopBuild scored the highest full-year guidance raise among its peers. The stock is up 9% since reporting and currently trades at $394.80.
Installed Building Products (NYSE:IBP)
Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.Installed Building Products reported revenues of $760.6 million, up 7.7% year on year. This result met analysts’ expectations. More broadly, it was a mixed quarter as it also logged a solid beat of analysts’ adjusted operating income estimates but a miss of analysts’ EPS estimates.
The stock is flat since reporting and currently trades at $229.01.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), has fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty heading into 2025.Want to invest in winners with rock-solid fundamentals? Check out our and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
This content was originally published on Stock Story
