Looking back on home builders stocks’ Q3 earnings, we examine this quarter’s best and worst performers, including LGI Homes (NASDAQ:LGIH) 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 12 home builders stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was 99.9% below.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 13.7% since the latest earnings results.
LGI Homes (NASDAQ:LGIH)
Based in Texas, LGI Homes (NASDAQ:LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.LGI Homes reported revenues of $651.9 million, up 5.6% year on year. This print exceeded analysts’ expectations by 1.6%. Overall, it was a satisfactory quarter for the company with an impressive beat of analysts’ adjusted operating income estimates but a significant miss of analysts’ backlog estimates.
“Our strong third quarter financial results reflect our focus on operational excellence and a commitment to maximize our profitability,” said Eric Lipar, Chairman and Chief Executive Officer of LGI Homes.
Unsurprisingly, the stock is down 9.9% since reporting and currently trades at $93.14.
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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.
However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $91.40.
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 significantly and a significant miss of analysts’ EBITDA estimates.
D.R. Horton delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 22.3% since the results and currently trades at $140.18.
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 was in line with analysts’ expectations. Aside from that, it was a mixed quarter as it also produced a solid beat of analysts’ adjusted operating income estimates but a miss of analysts’ EPS estimates.
The stock is down 22.1% since reporting and currently trades at $177.21.
KB Home (NYSE:KBH)
The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.KB Home reported revenues of $1.75 billion, up 10.4% year on year. This print beat analysts’ expectations by 1.4%. Zooming out, it was a softer quarter as it produced full-year revenue guidance missing analysts’ expectations.
KB Home had the weakest full-year guidance update among its peers. The stock is down 24.6% since reporting and currently trades at $65.90.
Market Update
Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.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
