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Tri Pointe Homes, Inc. (TPH - Free Report) is bullish about housing this spring buying season. Analysts are raising full year earnings estimates on this Zacks Rank #1 (Strong Buy).
The housing bears got it wrong about the builders in 2023.
Tri Pointe Homes is a large national homebuilder which builds premium homes in 10 states and the District of Columbia.
Another Beat in Q1
On Apr 27, Tri Pointe Homes reported its first quarter results and beat again on the Zacks Consensus Estimate. It crushed it, reporting $0.73 versus the consensus of $0.42, for a 74% beat.
Clearly the analysts were too pessimistic on the homebuilders to start the year.
It has now beat 16 quarters in a row, with just 1 miss in the last 5 years. That miss wasn't even during the pandemic, but happened prior to it, in 2019.
Image Source: Zacks Investment Research
After a difficult fourth quarter of 2022 when new home sales were frozen as mortgage rates rose above 7%, lower mortgage rates in 2023 have allowed consumers to adjust to the new reality with rates over 6%.
The buyers are back and new home orders have rebounded while cancellation rates have fallen. However, net new home orders still fell 15% from last year's strong quarter to 1619.
The cancellation rate was 10%, up from 8%, but still not as bad as feared by the Street.
Through targeted pricing, incentives and product repositioning, the absorption rate rose to 4.0 per community, above pre-pandemic historical seasonal levels.
Tri Pointe Is Bullish
Tri Pointe is still seeing strong demand and believes the supply and demand dynamics are a strong tailwind for the homebuilding industry. There is a big contingent of Millennial buyers and little inventory either in new or existing homes.
Tri Pointe had gross margins of 23.5% in the first quarter and still sees healthy margins between 22% and 23% in Q2.
For the full year, it anticipates delivering between 4,500 and 5,000 homes at an average sales price between $690,000 and $700,000.
The analysts are equally as bullish. 2 estimates were raised for the full year since the earnings report, pushing the Zacks Consensus up to $3.07 from $2.82.
This is still an earnings decline of 44.6% as earnings were $5.54 last year. But 2022 was a record year that was unlikely to be repeated.
1 estimate was also raised for 2024, with the Zacks Consensus rising to $3.80 from $3.76. That's earnings growth of 24%.
Shares at 5-Year Highs: Should You Buy?
Tri Pointe has rallied over the last 3 months, adding 24.3% during that time. It's at 5-year highs.
Image Source: Zacks Investment Research
But shares are still attractively priced with a forward P/E of 9.3 and a PEG ratio of 0.7. A PEG ratio under 1.0 indicates the company has both growth and value.
Tri Pointe does not pay a dividend but it is doing a share buyback. It bought $37.6 million worth of shares in the first quarter.
The momentum is with the homebuilders in 2023. Analysts and Wall Street got too bearish.
Those investors interested in the homebuilders might want to keep Tri Pointe on their short list.
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Bull of the Day: Tri Pointe Homes (TPH)
Tri Pointe Homes, Inc. (TPH - Free Report) is bullish about housing this spring buying season. Analysts are raising full year earnings estimates on this Zacks Rank #1 (Strong Buy).
The housing bears got it wrong about the builders in 2023.
Tri Pointe Homes is a large national homebuilder which builds premium homes in 10 states and the District of Columbia.
Another Beat in Q1
On Apr 27, Tri Pointe Homes reported its first quarter results and beat again on the Zacks Consensus Estimate. It crushed it, reporting $0.73 versus the consensus of $0.42, for a 74% beat.
Clearly the analysts were too pessimistic on the homebuilders to start the year.
It has now beat 16 quarters in a row, with just 1 miss in the last 5 years. That miss wasn't even during the pandemic, but happened prior to it, in 2019.
Image Source: Zacks Investment Research
After a difficult fourth quarter of 2022 when new home sales were frozen as mortgage rates rose above 7%, lower mortgage rates in 2023 have allowed consumers to adjust to the new reality with rates over 6%.
The buyers are back and new home orders have rebounded while cancellation rates have fallen. However, net new home orders still fell 15% from last year's strong quarter to 1619.
The cancellation rate was 10%, up from 8%, but still not as bad as feared by the Street.
Through targeted pricing, incentives and product repositioning, the absorption rate rose to 4.0 per community, above pre-pandemic historical seasonal levels.
Tri Pointe Is Bullish
Tri Pointe is still seeing strong demand and believes the supply and demand dynamics are a strong tailwind for the homebuilding industry. There is a big contingent of Millennial buyers and little inventory either in new or existing homes.
Tri Pointe had gross margins of 23.5% in the first quarter and still sees healthy margins between 22% and 23% in Q2.
For the full year, it anticipates delivering between 4,500 and 5,000 homes at an average sales price between $690,000 and $700,000.
The analysts are equally as bullish. 2 estimates were raised for the full year since the earnings report, pushing the Zacks Consensus up to $3.07 from $2.82.
This is still an earnings decline of 44.6% as earnings were $5.54 last year. But 2022 was a record year that was unlikely to be repeated.
1 estimate was also raised for 2024, with the Zacks Consensus rising to $3.80 from $3.76. That's earnings growth of 24%.
Shares at 5-Year Highs: Should You Buy?
Tri Pointe has rallied over the last 3 months, adding 24.3% during that time. It's at 5-year highs.
Image Source: Zacks Investment Research
But shares are still attractively priced with a forward P/E of 9.3 and a PEG ratio of 0.7. A PEG ratio under 1.0 indicates the company has both growth and value.
Tri Pointe does not pay a dividend but it is doing a share buyback. It bought $37.6 million worth of shares in the first quarter.
The momentum is with the homebuilders in 2023. Analysts and Wall Street got too bearish.
Those investors interested in the homebuilders might want to keep Tri Pointe on their short list.