Let’s dig into the relative performance of Installed Building Products (NYSE: IBP) and its peers as we unravel the now-completed Q1 home builders earnings season.
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 12 home builders stocks we track reported a slower Q1. As a group, revenues beat analysts’ consensus estimates by 0.8%.
Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 6.9% 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 $684.8 million, down 1.2% year on year. This print exceeded analysts’ expectations by 1.5%. Overall, it was a satisfactory quarter for the company with an impressive beat of analysts’ organic revenue estimates but a significant miss of analysts’ EPS estimates.
“IBP delivered solid first quarter financial results, reflecting our focus on maintaining a high level of installation service for our customers across the U.S. In the first quarter, our core homebuilding customers continued to navigate industry-wide housing affordability challenges and a slower-than-expected spring selling season. While we expect housing demand to remain connected to changes in affordability and the macroeconomic backdrop this year, we believe the long-term opportunities across our residential and commercial end markets remain attractive,” stated Jeff Edwards, Chairman and Chief Executive Officer.
Unsurprisingly, the stock is down 2.4% since reporting and currently trades at $159.99.
Is now the time to buy Installed Building Products? Access our full analysis of the earnings results here, it’s free.
Best Q1: Toll Brothers (NYSE: TOL)
Started by two brothers who started by building and selling just one home in Pennsylvania, today Toll Brothers (NYSE: TOL) is a luxury homebuilder across the United States.
Toll Brothers reported revenues of $2.74 billion, down 3.5% year on year, outperforming analysts’ expectations by 9.9%. The business had an incredible quarter with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ EPS estimates.
Toll Brothers scored the biggest analyst estimates beat among its peers. However, the results were likely priced into the stock as it’s traded sideways since reporting. Shares currently sit at $104.
Is now the time to buy Toll Brothers? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: 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 $351.4 million, down 10.1% year on year, falling short of analysts’ expectations by 5%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.
As expected, the stock is down 13.6% since the results and currently trades at $51.17.
Read our full analysis of LGI Homes’s results here.
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 $7.63 billion, up 4.4% year on year. This result topped analysts’ expectations by 2%. Aside from that, it was a mixed quarter as it also produced a solid beat of analysts’ EPS estimates but a miss of analysts’ backlog estimates.
The stock is down 11.9% since reporting and currently trades at $105.72.
Read our full, actionable report on Lennar here, it’s free.
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 $7.73 billion, down 15.1% year on year. This number missed analysts’ expectations by 3.9%. It was a disappointing quarter as it also recorded full-year revenue guidance missing analysts’ expectations and a significant miss of analysts’ EBITDA estimates.
D.R. Horton had the weakest full-year guidance update among its peers. The stock is flat since reporting and currently trades at $118.01.
Read our full, actionable report on D.R. Horton 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 U.S. 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, leaving much uncertainty around 2025.
Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.
