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Tri Pointe (TPH) Soars to 52-Week High: More Room to Run?
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Tri Pointe Homes, Inc. (TPH - Free Report) touched a new 52-week high of $25.95 on Apr 11, 2023. The stock pulled back to end the trading session at $25.75, up 2.63% from the previous day’s closing price of $25.09.
The company’s shares have gained 26.2% in the past three months compared with the Zacks Building Products - Home Builders industry’s 9.8% growth. The upside stemmed from strong earnings surprise history. Its earnings have surpassed the Zacks consensus estimates in the trailing 15 quarters. The company has been gaining strength from its land acquisition strategy and focus on higher operating leverage.
For the first quarter of 2023, TPH expects to deliver 750-850 homes at an average sales price (ASP) of $720,000-$730,000. Homebuilding gross margin is likely to be in the range of 23-24% and SG&A expense, as a percentage of home sales revenue, is anticipated to be within 14-14.5%. In the first quarter of 2022, the company delivered 1,099 homes for $660,000 ASP. Also, it reported Homebuilding gross margin of 26.8% and SG&A expenses of 11.1%.
Although the prevailing industry headwinds and slowness in the market will be reflected in the next few quarters of 2023, the company aims to achieve 10-20% cost reductions by the end of 2023. Also, it projects to reduce cycle times by an average of four to six weeks this year.
Strategic Moves: TPH has focused on analyzing price positioning and product offerings at both existing and future communities amid a challenging market in the second half of 2022. It has also been driving cost savings to produce more affordable price points. Owing to these strategies, Tri Pointe has witnessed a positive result in the ongoing period. In January, net new home orders were 421 with an absorption rate of 3.1 per community. February also experienced similar growth.
Significant Operating Leverage: The company is focused on achieving operating leverage by controlling overhead costs in order to drive the bottom line as well as cash flow. In 2022, SG&A, as a percentage of total revenues, improved 60 basis points (bps) year over year. Particularly in fourth-quarter 2022, SG&A decreased 90 bps year over year. Going forward, the company is optimistic about creating more unified methods that lead to operational and cost efficiencies for the company over time.
Solid Land-Acquisition Strategy: Tri Pointe Homes is consistently focused on land acquisition and development activities, which are critical for community count as well as top-line growth. Also, the company made further efforts to acquire land in a more capital-efficient manner. Currently, the company controls or owns nearly 33,794 lots of land. Tri Pointe Homes is also partnering with different intermediaries to accelerate the purchase and development of land investments in a much more risk-averse way.
Key Picks
Some better-ranked stocks in the Zacks Construction sector are:
Installed Building Products, Inc. (IBP - Free Report) — sporting a Zacks Rank #1 — is a leading installer of insulation and complementary building products. It primarily banks on a robust pipeline of acquisition opportunities across multiple geographies, products and end markets.
Installed Building’s earnings for 2023 are expected to decline 5.7%. Nonetheless, the same has moved north to $8.44 per share from $7.45 per share over the past 60 days, reflecting analysts’ optimism for its growth potential.
Otis Worldwide Corporation (OTIS - Free Report) — holding a Zacks Rank #2 (Buy) — is one of the leading elevator and escalator manufacturing, installation and service companies. Otis’ primary focus on innovation is core to its strategy. The company connects global R&D efforts through an operating model that sets global and local priorities based on customer and segment needs. Its focus is on innovation and expansion of the digital ecosystem, and a suite of digital solutions for both existing service portfolio customers and new equipment shipments from factories.
OTIS surpassed earnings estimates in all of the trailing four quarters, with the average surprise being 4.6%. The company’s earnings for 2023 are expected to increase 8.2%.
Masco Corporation (MAS - Free Report) — carrying a Zacks Rank #2 — manufactures, sells and installs home improvement and building products. MAS benefits from its market-leading brands, acquisition synergies and cost-saving move. Notably, its solid long-term growth prospect amid slow housing demand is commendable.
Masco’s earnings for 2023 are expected to decline 13%. Nonetheless, its earnings is expected to grow at 4.9% in long run.
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Tri Pointe (TPH) Soars to 52-Week High: More Room to Run?
Tri Pointe Homes, Inc. (TPH - Free Report) touched a new 52-week high of $25.95 on Apr 11, 2023. The stock pulled back to end the trading session at $25.75, up 2.63% from the previous day’s closing price of $25.09.
The company’s shares have gained 26.2% in the past three months compared with the Zacks Building Products - Home Builders industry’s 9.8% growth. The upside stemmed from strong earnings surprise history. Its earnings have surpassed the Zacks consensus estimates in the trailing 15 quarters. The company has been gaining strength from its land acquisition strategy and focus on higher operating leverage.
For the first quarter of 2023, TPH expects to deliver 750-850 homes at an average sales price (ASP) of $720,000-$730,000. Homebuilding gross margin is likely to be in the range of 23-24% and SG&A expense, as a percentage of home sales revenue, is anticipated to be within 14-14.5%. In the first quarter of 2022, the company delivered 1,099 homes for $660,000 ASP. Also, it reported Homebuilding gross margin of 26.8% and SG&A expenses of 11.1%.
Although the prevailing industry headwinds and slowness in the market will be reflected in the next few quarters of 2023, the company aims to achieve 10-20% cost reductions by the end of 2023. Also, it projects to reduce cycle times by an average of four to six weeks this year.
Image Source: Zacks Investment Research
Let’s delve deeper into the factors aiding this Zacks Rank #3 (Hold) company. You can see the complete list of today’s Zacks #1 Rank stocks here.
Strategic Moves: TPH has focused on analyzing price positioning and product offerings at both existing and future communities amid a challenging market in the second half of 2022. It has also been driving cost savings to produce more affordable price points. Owing to these strategies, Tri Pointe has witnessed a positive result in the ongoing period. In January, net new home orders were 421 with an absorption rate of 3.1 per community. February also experienced similar growth.
Significant Operating Leverage: The company is focused on achieving operating leverage by controlling overhead costs in order to drive the bottom line as well as cash flow. In 2022, SG&A, as a percentage of total revenues, improved 60 basis points (bps) year over year. Particularly in fourth-quarter 2022, SG&A decreased 90 bps year over year. Going forward, the company is optimistic about creating more unified methods that lead to operational and cost efficiencies for the company over time.
Solid Land-Acquisition Strategy: Tri Pointe Homes is consistently focused on land acquisition and development activities, which are critical for community count as well as top-line growth. Also, the company made further efforts to acquire land in a more capital-efficient manner. Currently, the company controls or owns nearly 33,794 lots of land. Tri Pointe Homes is also partnering with different intermediaries to accelerate the purchase and development of land investments in a much more risk-averse way.
Key Picks
Some better-ranked stocks in the Zacks Construction sector are:
Installed Building Products, Inc. (IBP - Free Report) — sporting a Zacks Rank #1 — is a leading installer of insulation and complementary building products. It primarily banks on a robust pipeline of acquisition opportunities across multiple geographies, products and end markets.
Installed Building’s earnings for 2023 are expected to decline 5.7%. Nonetheless, the same has moved north to $8.44 per share from $7.45 per share over the past 60 days, reflecting analysts’ optimism for its growth potential.
Otis Worldwide Corporation (OTIS - Free Report) — holding a Zacks Rank #2 (Buy) — is one of the leading elevator and escalator manufacturing, installation and service companies. Otis’ primary focus on innovation is core to its strategy. The company connects global R&D efforts through an operating model that sets global and local priorities based on customer and segment needs. Its focus is on innovation and expansion of the digital ecosystem, and a suite of digital solutions for both existing service portfolio customers and new equipment shipments from factories.
OTIS surpassed earnings estimates in all of the trailing four quarters, with the average surprise being 4.6%. The company’s earnings for 2023 are expected to increase 8.2%.
Masco Corporation (MAS - Free Report) — carrying a Zacks Rank #2 — manufactures, sells and installs home improvement and building products. MAS benefits from its market-leading brands, acquisition synergies and cost-saving move. Notably, its solid long-term growth prospect amid slow housing demand is commendable.
Masco’s earnings for 2023 are expected to decline 13%. Nonetheless, its earnings is expected to grow at 4.9% in long run.