As the Q3 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the home builders industry, including Installed Building Products (NYSE:IBP) and its peers.
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 4.3% since the latest earnings results.
Installed Building Products (NYSE:IBP)
Founded in 1977, Installed Building Products (NYSE:IBP) is a company specializing in the installation of insulation, waterproofing, and other complementary building products for residential and commercial construction.
Installed Building Products reported revenues of $760.6 million, up 7.7% year on year. This print was in line with analysts’ expectations, but overall, it was a mixed quarter for the company with an impressive beat of analysts’ adjusted operating income estimates but a miss of analysts’ EPS estimates.
“IBP delivered record third-quarter revenue and profitability, with each end market, from residential to commercial, growing organically. Our talented and committed employees across the country focused on what they can control by providing our customers with reliable, high-quality building product installation service. The long-term view on demand for our installed service is unchanged. We believe residential and commercial end market trends are favorable as builders work to meet demand through the increased supply of houses, apartments, and commercial structures,” stated Jeff Edwards, Chairman and Chief Executive Officer.
Unsurprisingly, the stock is down 9.7% since reporting and currently trades at $205.49.
Is now the time to buy Installed Building Products? 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 and 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 1.9% since reporting. It currently trades at $101.40.
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 significantly and a significant miss of analysts’ EBITDA estimates.
D.R. Horton delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 10.7% since the results and currently trades at $161.
Read our full analysis of D.R. Horton’s results here.
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 result met analysts’ expectations. Overall, it was an exceptional quarter as it also logged a solid beat of analysts’ sales volume estimates and an impressive beat of analysts’ EBITDA estimates.
The stock is up 6.1% since reporting and currently trades at $96.50.
Read our full, actionable report on Skyline Champion here, it’s free.
Taylor Morrison Home (NYSE:TMHC)
Named “America’s Most Trusted Home Builder” in 2019, Taylor Morrison Home (NYSE:TMHC) builds single family homes and communities across the United States.
Taylor Morrison Home reported revenues of $2.12 billion, up 26.6% year on year. This number surpassed analysts’ expectations by 7.8%. It was a very strong quarter as it also put up a solid beat of analysts’ EBITDA estimates.
The stock is up 4.8% since reporting and currently trades at $68.01.
Read our full, actionable report on Taylor Morrison Home here, it’s free.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), has fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty heading into 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Hidden Gem Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
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