The Zacks Analyst Blog Highlights: Toll Brothers, Simpson Manufacturing, Gafisa, TRI Pointe Homes and Home Depot
CHICAGO, May 20, 2014 /PRNewswire/ -- Zacks.com 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 the Toll Brothers Inc. (NYSE:TOL-Free Report), Simpson Manufacturing Co., Inc. (NYSE:SSD-Free Report), Gafisa S.A. (NYSE:GFA-Free Report), TRI Pointe Homes, Inc. (NYSE:TPH-Free Report) and Home Depot Inc. (NYSE:HD-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Housing Construction Shoots Up in April
As per data provided by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, nationwide housing construction increased 13.2% in April to a seasonally adjusted annual rate of 1.07 million units. Housing construction increased in all the regions with the highest increase recorded in the Northeast and Midwest.
Released in May 2014, the data also showed that the double-digit increase in total housing construction in April was mostly driven by increased multifamily starts, which was the highest since Jan 2006. Multifamily starts rose 39.6% to 423,000 units, as more and more young people from the rental market turned into first time homebuyers.
Single-family housing starts increased 0.8% to 649,000 units. The flattish single-family housing starts in April were due to tight credit conditions and uncertain economic conditions. In fact, tight credit conditions, a volatile job market, the shortage of lots and skilled labor, and rising cost of materials have been acting as headwinds for the housing industry in 2014.
Regionally, combined housing production data was impressive in April. Housing production increased 42.1% in Midwest and 28.7% in the Northeast. On the other hand, housing production rose 1.5% in South and 11.1% in the West.
The data shows that issuance of new building permits which is an indicator of future home building activity, rose 8.0% in April. The increase in building permits was driven by a 21.8% increase in multifamily permits and 0.3% increase in single family starts.
Investors interested in the homebuilding sector can consider stocks like Toll Brothers Inc. (NYSE:TOL-Free Report), Simpson Manufacturing Co., Inc. (NYSE:SSD-Free Report), Gafisa S.A. (NYSE:GFA-Free Report) and TRI Pointe Homes, Inc. (NYSE:TPH-Free Report). While Simpson Manufacturing and Toll Brothers sports a Zacks Rank #1 (Strong Buy), Gafisa and TRI Pointe Homes hold a Zacks Rank #2 (Buy).
Home Depot (HD) Likely to Miss Q1 Earnings
The world's largest home improvement retailer, Home Depot Inc. (NYSE:HD-Free Report) is set to report its first quarter fiscal 2014 results on May 20. In the last quarter it posted a positive surprise of approximately 4.3%. Let's see how things are shaping up for this announcement.
Factors Influencing the Upcoming Results
Following an impressive fourth-quarter fiscal 2013, the company remains optimistic about its results for fiscal 2014. The company expects sales to increase 4.8% while earnings to grew by 16.5% to $4.38 per share in fiscal 2014.
However, we believe this optimism for the rest of the year could be slightly impacted by the upcoming quarter's results, wherein the company's sales might get hurt by slowdown in the housing industry growth due to severe winter weather in January and February, rising mortgage rates as well as increased housing prices. Additionally, we expect the impact on sales to slightly weigh upon first quarter earnings.
Earnings Whispers?
Our proven model does not conclusively show that Home Depot is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.
Negative Zacks ESP: ESP (Expected Surprise Prediction) for Home Depot is -1.01% since the Most Accurate estimate stands at 98 cents per share, which is lower than the Zacks Consensus Estimate of 99 cents.
Zacks Rank #4 (Sell): Home Depot's Zacks Rank #4 when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with a Zacks Ranks #4 and #5 (Sell-rated stocks) going into earnings announcement, especially when the company is seeing negative estimate revisions.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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