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Beazer Homes Up 16.4% in the Past 3 Months: What's Next for BZH?
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Beazer Homes USA, Inc. (BZH - Free Report) shares soared 19.3% in the past three months, outperforming the Zacks Building Products - Home Builders industry’s 7% growth and the broader Construction sector’s 3.4% rise. It has also fared well than the S&P 500’s growth of 11.6%.
Image Source: Zacks Investment Research
This Delaware-incorporated homebuilder, building single-family and multi-family homes in the United States, has also outperformed a few prominent industry players like D.R. Horton, Inc. (DHI - Free Report) , NVR, Inc. (NVR - Free Report) and Lennar Corporation (LEN - Free Report) . In the past three months, DHI and NVR gained 5.3%, while LEN rallied 4.8%, all below the industry’s average.
Beazer Homes’ three strategic pillars that differentiate its homes from both resale homes and other newly built homes is an encouraging factor to consider. The company’s second-quarter fiscal 2024 results reflect its ability to thrive in a prolonged high-rate environment. In the fiscal second quarter, net new orders were up 10% year over year, backed by 13.8% average active community count growth.
Trading Above 50-Day Moving Average
Technical indicators suggest strong performance for BZH. The stock is trading above its 50-day moving average, signaling a bullish trend as shown in the chart below.
Image Source: Zacks Investment Research
Estimates Revision Trend Upward
The Zacks Consensus Estimate for fiscal 2024 EPS has increased 0.7% and 3.1% for fiscal 2025 over the past 60 days. The positive estimate revision depicts optimism about the stock’s growth potential. The estimated figure indicates a 10.1% year-over-year decline in fiscal 2024 but 13.9% growth in fiscal 2025.
Image Source: Zacks Investment Research
Factors Supporting Growth
Differentiating Homes: In order to become a builder of choice, BZH has identified three strategic pillars that differentiate its homes from others. Mortgage Choice is the first pillar, which provides the most competitive interest rates, fees and service levels available as it has no ownership or other interest in a mortgage company.
Choice Plans, the second pillar, provide its buyers with more floor plan flexibility at no additional cost. Surprising Performance, the third pillar, emphasizes building high-quality homes and delivering outstanding customer experience.
Zero Energy Ready Homes: Beazer Homes is the first national builder to publicly commit to building Zero Energy Ready homes by the end of 2025. This means that its homes will meet the requirements of the U.S. Department of Energy’s Zero Energy Ready Home program and have a HERS index score of 45 or less.
Long-Term Business Strategy: The company continues to execute its long-term balanced growth strategy (through fiscal 2026), which is being supported by a less-leveraged and return-driven capital structure. This strategy provides BZH with the flexibility to reduce leverage through debt reduction, increase the return of capital to investors through stock repurchases, or increase investment in land and other operating assets in response to changing market conditions.
The company’s three multi-year strategic goals encompass expanding the active communities to more than 200, reducing net debt to net capitalization ratio below 30%, and reaching a target of 100% of home starts as Zero Energy Ready by the end of 2025.
Stock Valuation
BZH’s stock is currently undervalued compared to its industry, as shown in the chart below. Despite the company’s shares’ outperformance compared to its industry, its current valuation is still considered undervalued. This might imply that the market has not yet fully recognized or priced the company's potential growth prospects or earnings potential.
Image Source: Zacks Investment Research
What May Impact BZH
Higher Incentives & Increased Costs: Most homebuilders are currently witnessing an increase in closing cost incentives to boost sales. Also, higher sales and marketing costs related to new community activations and future growth are pressurizing margins.
Challenging Macro Backdrop: High borrowing costs are currently hindering home sales and builder sentiment, creating a challenging environment for housing investments.
The Federal government’s actions related to economic stimulus, taxation and borrowing limits are affecting consumer confidence and spending levels. With the Federal Reserve holding rates steady between 5.25% and 5.5% since August 2023, the sector faces significant challenges. Per the recent meeting in June 2024, the Fed takes back on its decision of more than one potential rate cut in the latter part of 2024. After this meeting, the probability of one rate cut in 2024 is expected, with chances of a median of four additional rate cuts in 2025.
Lower Return on Equity (ROE)
Beazer Homes’ trailing 12-month ROE is 14%, lower than the industry’s 18.4%, indicating the company’s inefficient usage of shareholders’ funds.
Image Source: Zacks Investment Research
Investment Thoughts
The company’s resilient efforts to enhance customer satisfaction and capitalize on favorable demographic trends create a solid foundation. Also, earnings estimate trends and valuation seem to be encouraging. However, caution is warranted due to current challenges in the housing market, rising costs and lower ROE.
Existing stakeholders should maintain their position in this Zacks Rank #3 (Hold) stock, while potential new investors may wait for more clarity on how BZH addresses these pressures and navigates the broader economic environment before making new investment decisions.
Image: Bigstock
Beazer Homes Up 16.4% in the Past 3 Months: What's Next for BZH?
Beazer Homes USA, Inc. (BZH - Free Report) shares soared 19.3% in the past three months, outperforming the Zacks Building Products - Home Builders industry’s 7% growth and the broader Construction sector’s 3.4% rise. It has also fared well than the S&P 500’s growth of 11.6%.
Image Source: Zacks Investment Research
This Delaware-incorporated homebuilder, building single-family and multi-family homes in the United States, has also outperformed a few prominent industry players like D.R. Horton, Inc. (DHI - Free Report) , NVR, Inc. (NVR - Free Report) and Lennar Corporation (LEN - Free Report) . In the past three months, DHI and NVR gained 5.3%, while LEN rallied 4.8%, all below the industry’s average.
Beazer Homes’ three strategic pillars that differentiate its homes from both resale homes and other newly built homes is an encouraging factor to consider. The company’s second-quarter fiscal 2024 results reflect its ability to thrive in a prolonged high-rate environment. In the fiscal second quarter, net new orders were up 10% year over year, backed by 13.8% average active community count growth.
Trading Above 50-Day Moving Average
Technical indicators suggest strong performance for BZH. The stock is trading above its 50-day moving average, signaling a bullish trend as shown in the chart below.
Image Source: Zacks Investment Research
Estimates Revision Trend Upward
The Zacks Consensus Estimate for fiscal 2024 EPS has increased 0.7% and 3.1% for fiscal 2025 over the past 60 days. The positive estimate revision depicts optimism about the stock’s growth potential. The estimated figure indicates a 10.1% year-over-year decline in fiscal 2024 but 13.9% growth in fiscal 2025.
Image Source: Zacks Investment Research
Factors Supporting Growth
Differentiating Homes: In order to become a builder of choice, BZH has identified three strategic pillars that differentiate its homes from others. Mortgage Choice is the first pillar, which provides the most competitive interest rates, fees and service levels available as it has no ownership or other interest in a mortgage company.
Choice Plans, the second pillar, provide its buyers with more floor plan flexibility at no additional cost. Surprising Performance, the third pillar, emphasizes building high-quality homes and delivering outstanding customer experience.
Zero Energy Ready Homes: Beazer Homes is the first national builder to publicly commit to building Zero Energy Ready homes by the end of 2025. This means that its homes will meet the requirements of the U.S. Department of Energy’s Zero Energy Ready Home program and have a HERS index score of 45 or less.
Long-Term Business Strategy: The company continues to execute its long-term balanced growth strategy (through fiscal 2026), which is being supported by a less-leveraged and return-driven capital structure. This strategy provides BZH with the flexibility to reduce leverage through debt reduction, increase the return of capital to investors through stock repurchases, or increase investment in land and other operating assets in response to changing market conditions.
The company’s three multi-year strategic goals encompass expanding the active communities to more than 200, reducing net debt to net capitalization ratio below 30%, and reaching a target of 100% of home starts as Zero Energy Ready by the end of 2025.
Stock Valuation
BZH’s stock is currently undervalued compared to its industry, as shown in the chart below. Despite the company’s shares’ outperformance compared to its industry, its current valuation is still considered undervalued. This might imply that the market has not yet fully recognized or priced the company's potential growth prospects or earnings potential.
Image Source: Zacks Investment Research
What May Impact BZH
Higher Incentives & Increased Costs: Most homebuilders are currently witnessing an increase in closing cost incentives to boost sales. Also, higher sales and marketing costs related to new community activations and future growth are pressurizing margins.
Challenging Macro Backdrop: High borrowing costs are currently hindering home sales and builder sentiment, creating a challenging environment for housing investments.
The Federal government’s actions related to economic stimulus, taxation and borrowing limits are affecting consumer confidence and spending levels. With the Federal Reserve holding rates steady between 5.25% and 5.5% since August 2023, the sector faces significant challenges. Per the recent meeting in June 2024, the Fed takes back on its decision of more than one potential rate cut in the latter part of 2024. After this meeting, the probability of one rate cut in 2024 is expected, with chances of a median of four additional rate cuts in 2025.
Lower Return on Equity (ROE)
Beazer Homes’ trailing 12-month ROE is 14%, lower than the industry’s 18.4%, indicating the company’s inefficient usage of shareholders’ funds.
Image Source: Zacks Investment Research
Investment Thoughts
The company’s resilient efforts to enhance customer satisfaction and capitalize on favorable demographic trends create a solid foundation. Also, earnings estimate trends and valuation seem to be encouraging. However, caution is warranted due to current challenges in the housing market, rising costs and lower ROE.
Existing stakeholders should maintain their position in this Zacks Rank #3 (Hold) stock, while potential new investors may wait for more clarity on how BZH addresses these pressures and navigates the broader economic environment before making new investment decisions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.