Zacks Analyst Blog Highlights: D.R. Horton, Berkshire Hathaway, Fortune Brands, USG, PPG Industries and International Paper

Mar 24, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, March 24, 2011 /PRNewswire/ -- Analyst Blog features: D.R. Horton (NYSE: DHI), Berkshire Hathaway (NYSE: BRK.B), Fortune Brands (NYSE: FO), USG (NYSE: USG), PPG Industries (PPG) and International Paper (NYSE: IP).


Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter:

Here are highlights from Wednesday's Analyst Blog:

Record Low New Home Sales

New Home Sales in February fell by 16.9% from January to a dismal rate of 250,000. Relative to a year ago, sales are down 28.0%. In a very faint silver lining to an otherwise dismal report, the January rate was revised up to 301,000 from 284,000. Thus relative to where we thought we were, it could be seen as a 12.0% decline.

The level was substantially worse than the expected rate of 288,000. The ten lowest months on record (back to 1963) for New Home Sales have all been in the last ten months. February is a new all-time record low.

We are down sharply from a year ago, and it is not like a year ago was a great time in the homebuilding industry either. Relative to the peak of the housing bubble (July 2005), new home sales are down 82.0%.

The graph below shows the history of new homes sales (blue, left scale) along with the growth in population (red, right scale), since presumably if you have more people, you will need more places for them to live.

Take a very close look at the relationship between New Home Sales and the grey recession bars. New Home Sales fall sharply before all recessions (with the exception of the bust caused recession of 2001) and then start to increase sharply in the middle of, or towards the end of, the recession. That clearly is not happening this time around.

If you want to know why the recovery has been anemic so far, look no further than the graph above! New home sales are vital to the overall economy. If new homes are not selling, then home builders have no reason to build more of them. After all, that is very expensive inventory to sit on.

New Home Sales Crucial to Growth

Unlike used home sales, each new home built creates a huge amount of economic activity. Not only are low new home sales bad for the big homebuilders like D.R. Horton (NYSE: DHI), but also for all the companies that make the products and supplies that go into making a new house. They range from Berkshire Hathaway (NYSE: BRK.B) for bricks, roofing materials and insulation to Fortune Brands (NYSE: FO) for plumbing fixtures and cabinets to USG (NYSE: USG) for wallboard to PPG Industries (PPG) for glass and paint to International Paper (NYSE: IP) for lumber.

In terms of employment, it is not just all the roofers and framers that lose jobs due to weak new home sales, but employees at all the firms that make the stuff that goes into making a new home. Of course, if those employees are out of work, they are not spending on other goods and services dragging down a host of seemingly unrelated businesses.

Not that the direct impact of construction jobs should be underestimated. Since the recession started, one out of every four jobs lost has come from the construction industry.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter:

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today:

About Zacks is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at

Visit for information about the performance numbers displayed in this press release.

Follow us on Twitter:

Join us on Facebook:

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Mark Vickery
Web Content Editor

SOURCE Zacks Investment Research, Inc.