As the craze of earnings season draws to a close, here’s a look back at some of the most exciting (and some less so) results from Q3. Today, we are looking at home builders stocks, starting with Skyline Champion (NYSE:SKY).
Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials.
The 11 home builders stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 99.9% below.
While some home builders stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 3.1% since the latest earnings results.
Skyline Champion (NYSE:SKY)
Founded in 1951, Skyline Champion (NYSE:SKY) is a manufacturer of modular homes and buildings in North America.
Skyline Champion reported revenues of $616.9 million, up 32.9% year on year. This print was in line with analysts’ expectations, and overall, it was an exceptional quarter for the company with a solid beat of analysts’ sales volume and EBITDA estimates.
“I am pleased to report that Champion Homes delivered another strong quarter, generating healthy margins and cash flow," said Mark Yost, President and Chief Executive Officer of Champion Homes.
Interestingly, the stock is up 7.9% since reporting and currently trades at $98.11.
Is now the time to buy Skyline Champion? Access our full analysis of the earnings results here, it’s free.
Best Q3: LGI Homes (NASDAQ:LGIH)
Based in Texas, LGI Homes (NASDAQ:LGIH) is a homebuilding company specializing in constructing affordable, entry-level single-family homes in desirable communities across the United States.
LGI Homes reported revenues of $651.9 million, up 5.6% year on year, outperforming analysts’ expectations by 1.6%. The business had a stunning quarter with a solid beat of analysts’ backlog estimates and an impressive beat of analysts’ adjusted operating income estimates.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 3.4% since reporting. It currently trades at $99.81.
Is now the time to buy LGI Homes? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: D.R. Horton (NYSE:DHI)
One of the largest homebuilding companies in the U.S., D.R. Horton (NYSE:DHI) builds a variety of new construction homes across multiple markets.
D.R. Horton reported revenues of $10 billion, down 4.8% year on year, falling short of analysts’ expectations by 1.9%. It was a disappointing quarter as it posted full-year revenue guidance missing analysts’ expectations.
D.R. Horton delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 9.4% since the results and currently trades at $163.50.
Read our full analysis of D.R. Horton’s results here.
KB Home (NYSE:KBH)
The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
KB Home reported revenues of $1.75 billion, up 10.4% year on year. This number beat analysts’ expectations by 1.4%. Zooming out, it was a softer quarter as it logged full-year revenue guidance missing analysts’ expectations.
KB Home had the weakest full-year guidance update among its peers. The stock is down 10.1% since reporting and currently trades at $78.64.
Read our full, actionable report on KB Home here, it’s free.
Lennar (NYSE:LEN)
One of the largest homebuilders in America, Lennar (NYSE:LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.
Lennar reported revenues of $9.42 billion, up 7.9% year on year. This result beat analysts’ expectations by 2.8%. Taking a step back, it was a softer quarter as it recorded a significant miss of analysts’ adjusted operating income estimates.
The stock is down 12.1% since reporting and currently trades at $169.20.
Read our full, actionable report on Lennar here, it’s free.
Market Update
As a result of the Fed's rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed's 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump's victory in the US Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain. Said differently, there's still much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Top 6 Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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