With increasing population levels, urbanization, and shifting demographics boosting demand for new housing, the construction sector is expanding robustly. Additionally, a growing desire for modern, energy-efficient homes is growing, further accelerating the sector’s expansion.
Therefore, with the industry’s tailwinds, it could be wise to invest in fundamentally strong construction stocks like PulteGroup, Inc. (PHM), NVR, Inc. (NVR), and Tri Pointe Homes, Inc. (TPH) amid rising housing demand.
The construction sector is poised to benefit significantly from current market dynamics. With mortgage levels dropping to their lowest in nearly 15 months, the demand for housing has been on the rise. Additionally, despite high interest rates, the Federal Reserve’s interest rate cut last month will further boost the industry’s growth prospects.
That said, privately-owned housing completions in July reached an annual rate of 1,529,000, marking a 13.8% increase from July 2023. Single-family housing completions were at a rate of 1,054,000, up 0.5% from the revised June rate of 1,049,000.
According to Statista, the residential real estate market in the United States is projected to reach a value of $106.70 trillion by 2024. This projection shows a steady annual growth rate of 3.6% from 2024 to 2029, with an anticipated market volume of $127.40 trillion by 2029.
Considering all these factors, let us discuss the fundamentals of three Homebuilders stocks, starting with number 3.
Stock #3: PulteGroup, Inc. (PHM)
PHM engages in the homebuilding business in the United States. It acquires and develops land primarily for residential purposes and constructs housing on such land. The company also offers various home designs under the Centex, Pulte Homes, Del Webb, DiVosta Homes, American West, and John Wieland Homes and Neighborhoods brand names.
On September 4, 2024, PHM announced a quarterly cash dividend of $0.20 per share, payable on October 2, 2024, to shareholders of record as of September 17, 2024.
On July 9, 2024, PHM announced the pre-sale of Deep Creek at Jordanelle Ridge, its first Utah community in over 20 years. Located in Heber City, it offers outdoor living with city conveniences, featuring eight home designs, along with upcoming townhomes and amenities.
PHM’s total revenues for the fiscal second quarter that ended on June 30, 2024, increased 9.8% year-over-year to $4.60 billion. The company’s net income came in at $809.13 million, representing a 12.3% year-over-increase, while its EPS grew 19.3% over the prior-year quarter to $3.83.
Street expects PHM’s revenue for the quarter ending September 2024 to increase 7.1% year-over-year to $4.29 billion. Its EPS for the same quarter is expected to increase 10.1% year-over-year to $3.19. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 42.3% to close the last trading session at $142.97.
PHM’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #5 out of 23 stocks in the Homebuilders industry. PHM has an A grade for Momentum and a B for Quality.
To access PHM’s grades for Growth, Sentiment, Value, and Stability, click here.
Stock #2: NVR, Inc. (NVR)
NVR is a homebuilder in the United States, operating through its Homebuilding and Mortgage Banking segments. It engages in the construction and sale of single-family detached homes, townhomes, and condominium buildings under the Ryan Homes, NVHomes, and Heartland Homes names.
On April 25, NVR announced the signing of an agreement with La Cité Development, a leading real estate development corporation, to add 180 units of single-family homes to a large-scale redevelopment of 32.94 acres in Poppleton, West Baltimore, for approximately $800 million.
For the fiscal second quarter ended June 30, 2024, NVR’s revenue increased 11.6% year-over-year to $2.55 billion, and its operating income was $495.25 million, up 12.2% from the year-ago value. Its net income was $400.90 million. Additionally, the company’s EPS rose 3.6% from the prior-year quarter to $120.69.
Analysts expect NVR’s revenue and EPS for the quarter ending September 2024 to increase by 7.1% and 5% year-over-year to $2.69 billion and $131.52, respectively. NVR surpassed Street EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 38.7% to close the last trading session at $9,636.
NVR’s solid prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Sentiment and Quality. It is ranked #4 in the Homebuilders industry.
Click here to see NVR’s Growth, Value, and Stability ratings.
Stock #1: Tri Pointe Homes, Inc. (TPH)
TPH specializes in the construction and sale of single-family attached and detached homes. It sells its homes through its sales representatives and third-party brokers under six regional brands: Maracay, Pardee Homes, Quadrant Homes, Trendmaker Homes, Winchester Homes, and TRI Pointe Homes.
On September 11, TPH unveiled Alterra, a 62-home neighborhood located in Newcastle, Washington, where Eastside homebuyers will soon have the opportunity to purchase homes. With newer portfolios that are changing with ever-evolving customer preferences, TPH is staying on top of the homebuilder's industry and ensuring a stable growth prospect.
For its fiscal second quarter that ended June 30, 2024, TPH’s total revenues increased 37.6% year-over-year to $1.14 billion. Its net income available to common stockholders came in at $118 million or $1.25 per share, indicating increases of 94.3% and 108.3% year-over-year, respectively. Additionally, the company’s adjusted EBITDA came in at $216 million, increasing 66.2% year-over-year.
Street expects TPH’s revenue and EPS for the fiscal third quarter ending September 2024 to increase by 27.3% and 41.7% year-over-year to $1.05 billion and $1.08, respectively. Additionally, it surpassed the EPS and revenue estimates in each of its trailing four quarters, which is excellent.
Over the past nine months, the stock has gained 31.3% to close the last trading session at $44.83.
It’s no surprise that TPH has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Momentum and a B for Value, Growth, and Sentiment. Out of 23 stocks in the same industry, it is ranked #3.
In addition to the POWR Ratings we’ve stated above, we also have TPH’s ratings for Stability and Quality. Get all TPH ratings here.
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About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
3 Construction Stocks to Buy for the Housing Market Surge StockNews.com
