Taylor Morrison Home
released earnings at an ideal time—and all home-builder stocks are getting a boost.
The Arizona-based builder reported generally accepted accounting principles (or GAAP) earnings per share of $0.87 on sales of $1.7 billion, soaring past consensus estimates of $0.62 cents per share on about $1.5 billion in sales.
Taylor Morrison’s (ticker: TMHC) total third-quarter revenue represents an increase of about 54% compared with the same period in 2019, while its net sales orders grew about 74% to 4,425 from 2,540 in the same period, the builder said.
Some of that year-over-year growth is not necessarily a surprise, considering the builder acquired
s Homes in early 2020. In its 8-K filing, Taylor Morrison credits the net sales increase to both the William Lyon acquisition and strong demand trends in the larger housing market.
The home builder’s stock—and shares of others in the industry—were resilient on Wednesday, remaining flat or posting modest gains instead of falling with the broader stock market as they did earlier this week. Taylor Morrison stock closed about 1.4% higher. The largest public home builders—
(PHM)—were effectively flat, while the
Dow Jones Industrial Average
fell 3.4% and 3.5%, respectively.
In addition to Taylor Morrison’s earnings beat, the industry’s relative strength in the wake of this week’s broader market drop could be partially explained by uncertainty around Covid-19’s resurgence in the U.S. and Europe. France imposed a national lockdown Wednesday, becoming the first country to re-enter one. Germany also imposed new restrictions. Investors might see home builders as an industry that has already benefited once from these measures and will continue to do so.
The 10-year Treasury yield, which impacts housing affordability due to its tie to mortgage rates, was at 0.79% Wednesday, 11 basis points (one-hundredth of a percentage point) higher than it was on Oct. 1. They dipped earlier Wednesday as investors moved from stocks to bonds amid returning fears of Covid-19 but closed nearly flat from the prior day.
Taylor Morrison’s earnings—as well as those of the smaller
(MHO), which also reported on Wednesday—may be seen as a boon for other companies in the industry.
“Our industry is clearly benefiting from several tailwinds, including historically low interest rates, limited inventory found a shift into a new home market by consumers in search of clean, healthy, and functional spaces for their families,” Taylor Morrison CEO
said on a conference call with investors Wednesday morning while highlighting the company’s sales pace, which the CEO said remained within a relatively consistent range throughout the quarter, even as the builder increased prices to manage its backlog. “These trends have magnified favorable demographics that were in place prior to the pandemic and will likely persist long after it.”
Amid heightened demand, the builder says it implemented a price boost across almost all of its communities in August, while reducing incentives. Those price increases “are sufficient to cover anticipated lumber and other cost inflation as we look ahead to 2021,” the CEO said on the call. “While there is further runway to raise prices in the current environment, particularly in the move up and luxury segment, we also recognize the need to be mindful of preserving affordability for prospective buyers, particularly at the affordable entry level,” Palmer added.
Barron’s previously highlighted Taylor Morrison as a stock that had been overlooked by investors during the summer’s builder boom. The stock traded as high as $27.94 in intraday trading earlier this month—within 1.9% of its 52-week high—before the industry began selling off last week, partially due to an increase in the 10-year Treasury yield.
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