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Tri Pointe (TPH) on Expansion Spree, Opens Two Divisions

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Tri Pointe Homes, Inc. (TPH - Free Report) consistently focuses on ways to foster its growth capabilities. One of the primary ways of this is expanding its footprint in the domestic homebuilding market through organic and inorganic moves.

Aligning with its organic footprint expansion intentions, Tri Pointe, being a growth-oriented homebuilding company, recently announced the opening of divisions in Orlando, FL, and the Coastal Carolinas. The expansion of operations in Coastal Carolinas (near Charleston, SC) is based on the foundation of the company’s already present Raleigh and Charlotte markets, whereas the Florida office will be based in Orlando.

The expansion into two new divisions marks TPH’s milestone in continuing geographic expansion, which closely follows the company’s entry into the Utah market in late 2023. Furthermore, the market reach expanded into two of the fastest-growing regions in the United States, thus sparking growth prospects for Tri Pointe in 2024 and beyond.

With division presidents Joel Underwood and Ali Heavener for the Florida and Coastal Carolinas, respectively, TPH is all set to leverage the growth opportunities that the regions have to offer and cater to the growing needs of the communities.

Improving Housing Market Bodes Well

Per the current backdrop of the market, the housing market is beginning to normalize with increasing consumer confidence on the back of stable interest rates and improving economic conditions. This factor is proving positive for homebuilding companies like Tri Pointe, thus sparking the uptick in home deliveries and backlog levels. This, along with improving cycle times and construction starts, is an added benefit.

The continuation in low existing homes for sale is fanning the demand trend toward new homes, thus benefiting Tri Pointe, which shares space with KB Home (KBH - Free Report) , Toll Brothers, Inc. (TOL - Free Report) and NVR, Inc. (NVR - Free Report) . On the back of the current market backdrop, TPH’s net new home orders in 2023 were 6,122, up 40% year over year from 4,377. Also, the cancellation rate during the year declined to 10% from 19% in the year-ago period.

With increased order activity, a more normalized supply chain and shorter cycle times, the company is positioned well moving into 2024, as it believes the solid momentum to continue throughout the year.

A Brief Review of the Above-Mentioned Stocks

KB Home: The company is benefiting from comparably improved demand conditions and a lower cancelation rate. This is reflected in the 9% increase in homes delivered in first-quarter fiscal 2024 from the year-ago period.

KBH is further benefiting from its intent focus on implementing the built-to-order model, reducing cycle times and offering various forms of mortgage concessions. The company’s Built-to-Order approach, land acquisition strategies and liquidity position are encouraging for its growth prospects.

Toll Brothers: This homebuilding company has been benefiting from strong market demand, combined with its policy of boosting its supply of spec homes and focusing on operational efficiency. Also, the emphasis on affordable luxury communities and its build-to-order model bodes well.

Since mid-January, TOL has experienced a notable surge in demand coinciding with the onset of the spring selling season. Considering the upward market trend, the company expects home deliveries of 10,000-10,500 units in fiscal 2024, which reflects growth from the 9,597 units in fiscal 2023.

NVR: The low supply of existing homes and decreased average selling price of new orders have sparked new order growth and reduced cancellation rates, increasing the growth prospects of the company. On a unit basis, backlog at 2023 end improved 12% year over year to 10,229 homes and grew 10% on a dollar basis to $4.76 billion.

The lot acquisition strategy helps NVR avoid financial requirements and risks associated with direct land ownership and land development. This strategy allows it to gain efficiencies and a competitive edge over its peers.

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Tri Pointe Homes Inc. (TPH) - free report >>

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