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Beazer Homes USA, Inc. (BZH - Free Report) is cutting prices and offering incentives as the housing market slows. As a result, this Zacks Rank #5 (Strong Sell) is expected to see falling earnings in fiscal 2023.
Beazer Homes is one of the largest homebuilders in the United States. It builds homes in many states, including Arizona, California, Nevada, the Carolinas, Tennessee, Texas, Virginia, Georgia, Indiana, Delaware, and Florida.
It also operates a Mortgage Choice program which allows buyers to compare multiple loan offers and choose the best lender and loan offer.
Another Beat in the Fiscal Fourth Quarter of 2022
On Nov 10, 2022, Beazer Homes reported its fiscal fourth quarter 2022 results and beat the Zacks Consensus again. Beazer reported earnings of $2.82 versus the Zacks Consensus of $2.00. That's an $0.82 beat, or 41%.
Beazer has put out an amazing string of earnings beats. It has now beat 11 quarters in a row and has only missed twice in the last 5 years.
Image Source: Zacks Investment Research
But the fourth quarter was really backward looking, as it's the result of delivering on the big backlog that built up due to the strong demand during the pandemic.
Market conditions have turned more bearish, as mortgage rates rise, and sales drop.
"The environment for new home sales became significantly more challenging over the course of fiscal 2022, as higher mortgage rates worsened an already strained affordability equation for most buyers," said Allan P. Merrill, Beazer CEO.
"In response, we have increased incentives and reduced base prices in most of our communities. In the quarters ahead we will continue to adjust the included features, size, and pricing of our homes to compete for sales," he added.
However, on the bright side, commodity costs are coming down, especially lumber prices, which should help margins in 2023.
Earnings Estimates for Fiscal 2023 Get Cut
It's not a surprise, given market conditions, that Beazer Homes' earnings are expected to decline in fiscal 2023 after a red-hot fiscal 2022.
2 estimates have been cut in the last 60 days for fiscal 2023. It has pushed the Zacks Consensus Estimate down to $3.46 from $5.08 during that time.
That is 51.7% below fiscal 2022's earnings of $7.17. Analysts are looking for a rebound in fiscal 2024, but it's still expected to be below 2022's strong number.
Image Source: Zacks Investment Research
Value or Value Trap?
Beazer shares have fallen 44% in 2022. They appear to be dirt cheap, on a forward P/E basis. It trades with a forward P/E of just 3.6.
But with earnings expected to decline this fiscal year, it has more of a value trap look to it than a true value.
Investors interested in the home builder stocks might want to wait until the spring season to see what develops with sales and prices before diving into the stocks.
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Bear of the Day: Beazer Homes (BZH)
Beazer Homes USA, Inc. (BZH - Free Report) is cutting prices and offering incentives as the housing market slows. As a result, this Zacks Rank #5 (Strong Sell) is expected to see falling earnings in fiscal 2023.
Beazer Homes is one of the largest homebuilders in the United States. It builds homes in many states, including Arizona, California, Nevada, the Carolinas, Tennessee, Texas, Virginia, Georgia, Indiana, Delaware, and Florida.
It also operates a Mortgage Choice program which allows buyers to compare multiple loan offers and choose the best lender and loan offer.
Another Beat in the Fiscal Fourth Quarter of 2022
On Nov 10, 2022, Beazer Homes reported its fiscal fourth quarter 2022 results and beat the Zacks Consensus again. Beazer reported earnings of $2.82 versus the Zacks Consensus of $2.00. That's an $0.82 beat, or 41%.
Beazer has put out an amazing string of earnings beats. It has now beat 11 quarters in a row and has only missed twice in the last 5 years.
Image Source: Zacks Investment Research
But the fourth quarter was really backward looking, as it's the result of delivering on the big backlog that built up due to the strong demand during the pandemic.
Market conditions have turned more bearish, as mortgage rates rise, and sales drop.
"The environment for new home sales became significantly more challenging over the course of fiscal 2022, as higher mortgage rates worsened an already strained affordability equation for most buyers," said Allan P. Merrill, Beazer CEO.
"In response, we have increased incentives and reduced base prices in most of our communities. In the quarters ahead we will continue to adjust the included features, size, and pricing of our homes to compete for sales," he added.
However, on the bright side, commodity costs are coming down, especially lumber prices, which should help margins in 2023.
Earnings Estimates for Fiscal 2023 Get Cut
It's not a surprise, given market conditions, that Beazer Homes' earnings are expected to decline in fiscal 2023 after a red-hot fiscal 2022.
2 estimates have been cut in the last 60 days for fiscal 2023. It has pushed the Zacks Consensus Estimate down to $3.46 from $5.08 during that time.
That is 51.7% below fiscal 2022's earnings of $7.17. Analysts are looking for a rebound in fiscal 2024, but it's still expected to be below 2022's strong number.
Image Source: Zacks Investment Research
Value or Value Trap?
Beazer shares have fallen 44% in 2022. They appear to be dirt cheap, on a forward P/E basis. It trades with a forward P/E of just 3.6.
But with earnings expected to decline this fiscal year, it has more of a value trap look to it than a true value.
Investors interested in the home builder stocks might want to wait until the spring season to see what develops with sales and prices before diving into the stocks.