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DR Horton is America’s biggest homebuilder by volume and has held that position for the last 16 years. They operate in 26 states across the country and now build about 50,000 new homes per year in a wide range of prices from $100,000 to over $1,000,000. Homebuilding stocks have been sluggish in 2018, as fears of increased costs - as a result of lumber tariffs - and higher interest rates have had investors concerned about both margin and demand for new homes. Neither problem has actually materialized however, and earnings are as strong as ever.
The iShares U.S. Home Construction ETF has fallen over 14% year-to date and shares of DR Horton are down nearly 8%.
Double -Whammy in Lumber Prices and Interest Rates
In May of 2018, Lumber prices at the Chicago Mercantile Exchange reached all-time highs of $655/per 1000 board feet, due primarily to U.S. Tariffs on Canadian lumber imports. Shares in homebuilder shares took a hit as the average price of a new home was expected to rise as much as $9000 as a result of higher costs on their most important raw material.
In June, the leadership of the National Association of Home Builders (NAHB) met with U.S. Commerce Secretary Wilbur Ross and came away satisfied that the U.S. would continue negotiating with Canada on trade issues with an eye on ensuring a “stable supply of lumber at reasonable price to keep housing affordable for hard-working American families.”
As we referenced in the Bull of the Day today, 2018 has been a difficult year for the shares of home builders, with fears about rising commodity costs and interest rates threatening to slow demand for construction. While the homebuilders themselves seem to have weathered the storm and are now reporting better than expected results, many smaller suppliers have not done as well and are now facing continued reductions in expectations going forward.
Jeld-Wen Holding went public in January of 2017 at an IPO price of $23/share and despite a rocky start with a big miss in their first earnings report, found their footing later in the year, finishing 2017 north of $39 – 70% higher than the IPO.
Unfortunately, 2018 has been a rough year so far for Jeld-Wen with two significant misses in their last three reports and a share price that has tumbled all the way back to $26.67/share as of Wednesday’s close – just 15% above the IPO and down 32% on the year. The Building Products Industry as a whole is down just under 4% in 2018 and the S&P 500 shows a total return of better than 8%.
Jeld-Wen underwent a major management change earlier this year with the unexpected departure of former President and CEO Mark Beck who led the company through its IPO. The company did not release any details on Beck’s departure other than to say that it was a “mutual decision.” Management changes are common and not necessarily a sign of trouble, but the timing of Beck’s resignation – so soon after the IPO and in the midst of the acquisition of two smaller manufacturing companies – raises questions about the strength and continuity of management at the company.
Beck was replaced with an interim CEO, and after a four-month search, JELD named Gary S. Michel, formerly of Honeywell, International.
Financially, the disappointing results at Jeld-Wen are due to a combination of declining market share, shrinking net margins and increased debt.
The balance sheet at Jeld-Wen has deteriorated during 2018 with total debt increasing from $1.27B to $1.54B. Cash and equivalents were reduced from $220M to 137M. With negative cash flow from operations of $8m and $57M in capital expenditures so far this year, free cash flow through the second quarter is ($65M), considerably lower than the $46M in free cash flow the company reported in the first half of 2017.
Guidance for the balance of 2018 was disappointing as well, with the company lowering their Outlook for both net revenue growth and EBITDA while leaving guidance for capex unchanged. Analyst estimates have fallen as well with 9 recent downward revisions in the past 60 days. The Zacks Consensus Estimate for 2018 earnings now stands at $1.86/share – 11% lower than 60 days ago.
Additional content:
3 Tech Stocks for Dividend Investors to Buy Now
Tech stocks have been unpredictable at times recently, but the sector has rebounded from volatility strongly, and there is no question that tech has been the leader of the market’s strong multiyear run. However, this might mean that income investors—those focused on finding companies with solid dividends—might be feeling left out, as tech stocks aren’t really known for their payouts.
Finding a strong dividend-yielding tech stock might feel like searching for a golden goose, but investors should not feel too intimidated. In fact, dividend-focused investors can search for the best tech stocks by using the Zacks Stock Screener, the perfect one-stop screening tool for investors of all kinds.
By limiting our search to companies in our “Computer and Technology” sector with Zacks Rank #2 (Buy) or better rankings, we can ensure that we are finding the highest quality stocks to buy right now. Throw in your preferred dividend yield and voila—the best tech stocks for dividend investors to target!
Check out three of these stocks to buy now:
1. Garmin Ltd.
Garmin is a designer of GPS navigation and wearable technology equipment. The stock is holding a Zacks Rank #1 (Strong Buy) and presents a dividend yield of about 3.3%. Investors have to pay a slight premium for GRMN right now, but a valuation of 19.7x forward 12-month earnings and a PEG ratio of 2.7 are certainly not outrageous.
Meanwhile, Garmin generates $3.42 in cash per share and sticks out from the rest of the technology group with its net margin of 18.7%, which dramatically outpaces its industry’s average. Garmin is also an efficient company, evidenced by its RoE of 16%.
2. Texas Instruments Inc.
Although you might recognize the brand because of its calculators, Texas Instruments is actually one of the leading suppliers of advanced semiconductors in the world. TXN is currently sporting a Zacks Rank #2 (Buy). It should be a solid year of growth for the firm, with current estimates calling for earnings to expand by 32% in 2018.
The company is also witnessing cash flow growth of 19.5% right now. Texas Instruments is really a cash cow, bringing in a total of $5.34 in cash per share. Management uses its solid financial position to reward shareholders with a dividend yield of roughly 2.3% currently.
3. NetApp, Inc.
NetApp is a hybrid cloud, data management company. The firm provides a range of cloud data solutions, including physical drives, software, and backup storage. The stock is currently holding a Zacks Rank #1 (Strong Buy) and offers investors a dividend yield of 1.9%.
NetApp is projected to see a long-term annual EPS growth rate of more than 14%. The stock is trading at a slight pricey 18.6x forward earnings, but that tiny premium is reasonable considering NTAP's growth potential. Plus, looking at the stock's PEG of 1.3, we can see that investors are getting a decent price for the near-term growth outlook, at the very least.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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 analyst 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.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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DR Horton, Jeld-Wen Holding, Garmin, Texas Instruments and NetApp highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – August 22, 2018 – Zacks Equity Research highlights DR Horton (DHI - Free Report) as the Bull of the Day, Jeld-Wen Holding (JELD - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Garmin Ltd. (GRMN - Free Report) , Texas Instruments Inc. (TXN - Free Report) and NetApp, Inc. (NTAP - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
DR Horton is America’s biggest homebuilder by volume and has held that position for the last 16 years. They operate in 26 states across the country and now build about 50,000 new homes per year in a wide range of prices from $100,000 to over $1,000,000. Homebuilding stocks have been sluggish in 2018, as fears of increased costs - as a result of lumber tariffs - and higher interest rates have had investors concerned about both margin and demand for new homes. Neither problem has actually materialized however, and earnings are as strong as ever.
The iShares U.S. Home Construction ETF has fallen over 14% year-to date and shares of DR Horton are down nearly 8%.
Double -Whammy in Lumber Prices and Interest Rates
In May of 2018, Lumber prices at the Chicago Mercantile Exchange reached all-time highs of $655/per 1000 board feet, due primarily to U.S. Tariffs on Canadian lumber imports. Shares in homebuilder shares took a hit as the average price of a new home was expected to rise as much as $9000 as a result of higher costs on their most important raw material.
In June, the leadership of the National Association of Home Builders (NAHB) met with U.S. Commerce Secretary Wilbur Ross and came away satisfied that the U.S. would continue negotiating with Canada on trade issues with an eye on ensuring a “stable supply of lumber at reasonable price to keep housing affordable for hard-working American families.”
Bear of the Day:
As we referenced in the Bull of the Day today, 2018 has been a difficult year for the shares of home builders, with fears about rising commodity costs and interest rates threatening to slow demand for construction. While the homebuilders themselves seem to have weathered the storm and are now reporting better than expected results, many smaller suppliers have not done as well and are now facing continued reductions in expectations going forward.
Jeld-Wen Holding went public in January of 2017 at an IPO price of $23/share and despite a rocky start with a big miss in their first earnings report, found their footing later in the year, finishing 2017 north of $39 – 70% higher than the IPO.
Unfortunately, 2018 has been a rough year so far for Jeld-Wen with two significant misses in their last three reports and a share price that has tumbled all the way back to $26.67/share as of Wednesday’s close – just 15% above the IPO and down 32% on the year. The Building Products Industry as a whole is down just under 4% in 2018 and the S&P 500 shows a total return of better than 8%.
Jeld-Wen underwent a major management change earlier this year with the unexpected departure of former President and CEO Mark Beck who led the company through its IPO. The company did not release any details on Beck’s departure other than to say that it was a “mutual decision.” Management changes are common and not necessarily a sign of trouble, but the timing of Beck’s resignation – so soon after the IPO and in the midst of the acquisition of two smaller manufacturing companies – raises questions about the strength and continuity of management at the company.
Beck was replaced with an interim CEO, and after a four-month search, JELD named Gary S. Michel, formerly of Honeywell, International.
Financially, the disappointing results at Jeld-Wen are due to a combination of declining market share, shrinking net margins and increased debt.
The balance sheet at Jeld-Wen has deteriorated during 2018 with total debt increasing from $1.27B to $1.54B. Cash and equivalents were reduced from $220M to 137M. With negative cash flow from operations of $8m and $57M in capital expenditures so far this year, free cash flow through the second quarter is ($65M), considerably lower than the $46M in free cash flow the company reported in the first half of 2017.
Guidance for the balance of 2018 was disappointing as well, with the company lowering their Outlook for both net revenue growth and EBITDA while leaving guidance for capex unchanged. Analyst estimates have fallen as well with 9 recent downward revisions in the past 60 days. The Zacks Consensus Estimate for 2018 earnings now stands at $1.86/share – 11% lower than 60 days ago.
Additional content:
3 Tech Stocks for Dividend Investors to Buy Now
Tech stocks have been unpredictable at times recently, but the sector has rebounded from volatility strongly, and there is no question that tech has been the leader of the market’s strong multiyear run. However, this might mean that income investors—those focused on finding companies with solid dividends—might be feeling left out, as tech stocks aren’t really known for their payouts.
Finding a strong dividend-yielding tech stock might feel like searching for a golden goose, but investors should not feel too intimidated. In fact, dividend-focused investors can search for the best tech stocks by using the Zacks Stock Screener, the perfect one-stop screening tool for investors of all kinds.
By limiting our search to companies in our “Computer and Technology” sector with Zacks Rank #2 (Buy) or better rankings, we can ensure that we are finding the highest quality stocks to buy right now. Throw in your preferred dividend yield and voila—the best tech stocks for dividend investors to target!
Check out three of these stocks to buy now:
1. Garmin Ltd.
Garmin is a designer of GPS navigation and wearable technology equipment. The stock is holding a Zacks Rank #1 (Strong Buy) and presents a dividend yield of about 3.3%. Investors have to pay a slight premium for GRMN right now, but a valuation of 19.7x forward 12-month earnings and a PEG ratio of 2.7 are certainly not outrageous.
Meanwhile, Garmin generates $3.42 in cash per share and sticks out from the rest of the technology group with its net margin of 18.7%, which dramatically outpaces its industry’s average. Garmin is also an efficient company, evidenced by its RoE of 16%.
2. Texas Instruments Inc.
Although you might recognize the brand because of its calculators, Texas Instruments is actually one of the leading suppliers of advanced semiconductors in the world. TXN is currently sporting a Zacks Rank #2 (Buy). It should be a solid year of growth for the firm, with current estimates calling for earnings to expand by 32% in 2018.
The company is also witnessing cash flow growth of 19.5% right now. Texas Instruments is really a cash cow, bringing in a total of $5.34 in cash per share. Management uses its solid financial position to reward shareholders with a dividend yield of roughly 2.3% currently.
3. NetApp, Inc.
NetApp is a hybrid cloud, data management company. The firm provides a range of cloud data solutions, including physical drives, software, and backup storage. The stock is currently holding a Zacks Rank #1 (Strong Buy) and offers investors a dividend yield of 1.9%.
NetApp is projected to see a long-term annual EPS growth rate of more than 14%. The stock is trading at a slight pricey 18.6x forward earnings, but that tiny premium is reasonable considering NTAP's growth potential. Plus, looking at the stock's PEG of 1.3, we can see that investors are getting a decent price for the near-term growth outlook, at the very least.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Get today’s Zacks #1 Stock of the Day with your free subscription to Profit from the Pros newsletter:
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
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 analyst 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.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year. See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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Zacks Investment Research
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Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.