Existing-home sales have hit a nine-year high amid low interest rates and lower hiring, but mixed earnings reports Thursday from D.R. Horton (DHI), PulteGroup (PHM) and NVR (NVR) raise red flags.
Existing-home sales rose 1.1% in June to an annualized rate of 5.57 million, the best since February 2007, the National Association of Realtors said Thursday. Existing-home prices rose 4.8% vs. a year earlier amid tight supply.
But homebuilders' results were less positive.
D.R. Horton
The builder of single family and detached homes said its sales backlog was up 15% vs. Q2 2015, to 14,670 homes.
D.R. Horton shares fell fractionally to 34.29 on the stock market today after briefly hitting a 10-year high. The stock is still slightly out of buy range from a 32.61 entry point cleared on July 6.
IBD'S TAKE: D.R. Horton is ranked No. 2 in IBD's Builders-Residential/Commercial group. Which builder is No. 1? Find out at IBD Stock Checkup.
PulteGroup
PulteGroup reported Q2 net income of $118 million, or 37 cent EPS, up 32% vs. the same quarter a year ago. That beat estimates by 5 cents a share. Sales climbed 39% to $1.8 billion, topping views for $1.66 billion.
Deliveries increased 27% to 4,772 homes, combined with an 11% increase in average selling price to $367,000. Value of backlog rose 21% to $3.7 billion, while the number of homes in backlog increased 8% to 9,679 homes. Chairman and CEO Richard Dugas said a written statement that, "Equally important, given the 21% increase in our backlog value to $3.7 billion, we believe the company is well positioned to deliver outstanding full year performance."
PulteGroup also added three new directors to its board after reaching a deal with activist investor Elliott Management.
PulteGroup stock has not been a leader among homebuilders. But shares rose 5.3% to 21.51 hitting a 11-month high and clearing a handle in a long, somewhat sloppy consolidation.
NVR
NVR's Q2 EPS edged up fractionally to $22.01 a share, well below forecasts for $26.01 as sales dipped fractionally to $1.388 billion from $1.402 billion, missing Wall Street's $1.39 billion target. NVR stock fell sharply initially, but found support above its 200-day line and is now down just 0.7% at 1742.47, back above its 50-day. Shares broke out on July 8 to a record high, but quickly reversed in the following days.
LGI Homes
Among other homebuilders, shares of LGI Homes (LGIH), a builder of entry-level single-family homes in growth markets, jumped more than 4% to finish the trading day at 34.77 Thursday after S&P Dow Jones Indices announced late Wednesday that LGI Homes will replace doughnut chain Krispy Kreme Doughnuts (KKD) on the S&P 600 small-cap stock index next week. Krispy Kreme is being acquired by JAB Holdings.
LGI Homes is extended from a recent breakout, and is closing in on its record high of 36.07 on Dec. 2, 2015.
Sherwin-Williams
Separately, Sherwin-Williams (SHW) fell nearly 7% to 290.63, falling back below a 309.10 buy point after breaking on Wednesday. The paint seller and retailer reported Q2 EPS of $3.99 and revenue of $3.22 billion. Wall Street had expected Sherwin-Williams to deliver earnings of $4.16 on sales of $3.28 billion. Shares fell below their 50-day line.
