The Zacks Analyst Blog Highlights: Intel, D.R. Horton, Toll Brothers, Ryland Group and KB Home

Jul 18, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, July 18, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Intel (Nasdaq:INTC-Free Report), D.R. Horton, Inc. (NYSE: DHI-Free Report), Toll Brothers (NYSE: TOL-Free Report), The Ryland Group, Inc. (NYSE: RYL-Free Report) and KB Home (NYSE: KBH-Free Report).


Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday's Analyst Blog:

Intel Beats on EPS, Misses on Revenues

Semiconductor producer Intel (Nasdaq:INTC-Free Report), reported earnings after the bell, posting an EPS of $0.39 and revenues of $12.8 billion. The EPS was in-line with the Zacks Consensus Estimate, but revenues were just below expectations of $12.88 billion.

While Intel met on EPS, the continued decline in revenues is a significant issue for the street.  Moreover, the company changed its full year expectations from single digit growth to approximately flat growth year on year.  This downgrade in expectations coupled with a continued weakness in Component orders, Notebook ODM shipments, Motherboard shipments, and the decline in global PC units has the street concerned about future growth expectations.

On the positive, CAPEX estimations for the remainder of the year will decline by $1.0 billion to $11.0 billion (from $12.0 billion).  Moreover, Intel decreased its expectations of Gross margins by 1% (to 59% down from prior expectations of 60%).   Finally, the company also downgraded their estimations of R&D plus MG&A expenditures by $200 million.

In afterhours trading, INTC has declined over 2%, suggesting the street is still very cautious about their potential for growth admits this global decline in semiconductors, and complementary products.  Given the revenues miss (for the second consecutive quarter), and the downgrade of future growth expectations, we should see Intel remain under pressure for the remainder of the year. 

Encouraging Housing Data

Shares of some top homebuilders traded higher at the close of trading on Jul 16, buoyed by stronger-than-expected housing data released recently.

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI), known as the homebuilder sentiment index, jumped a robust 6 points to 57 in July from 51 in June. This was the third consecutive monthly increase in the index and was also the strongest increase in almost eight years.

The index reflects improved sales expectations for future as demand for new homes increases. Any reading on this index above 50 indicates that an increasing number of builders view the market conditions as good than poor.

Stocks of homebuilders like D.R. Horton, Inc. (NYSE: DHI-Free Report), Toll Brothers (NYSE: TOL-Free Report), The Ryland Group, Inc. (NYSE: RYL-Free Report) and KB Home (NYSE: KBH-Free Report) rose on improving expectations.

The jump in the index shows that the recent interest rate hikes have not dampened the housing recovery. According to the Freddie Mac mortgage survey, the 30 year fixed mortgage rate has risen from 3.59% on May 23 to 4.51% as of Jul 11.

We believe that though interest rates are increasing they are still below historical levels and housing is still increasingly affordable. Homebuilders have largely benefited from historically-low interest rates, eventually leading to the sharp increase in home buying activity since mid-2012.

Moreover, Federal Reserve Chairman Ben Bernanke's comments last week to keep interest rates low for some time has also provided some relief. Fed plans to keep the short-term interest rates at record low even if the unemployment rate falls below 6.5%, which is Fed's current benchmark to consider a tight monetary policy.

The Fed is currently buying $85 billion in government bonds and mortgage-backed securities a month, known as quantitative easing, to keep interest rates low and boost economic growth. Last month, however, Bernanke had announced plans to scale back this bond-buying plan and instead adopt a tighter monetary policy to avoid deflation, causing the U.S. markets to tumble.

Especially, investor confidence in the overall housing recovery was shaken due to concerns of rising interest rates if a tighter monetary policy was implemented. Bernanke's recent comments have, however, put these concerns to rest, at least for some time.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

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