PulteGroup, Inc. (PHM), D.R. Horton, Inc. (DHI), Lennar Corporation (LEN): Housing Construction on the Rise

Page 1 of 2

Rising household income due to an improving economic environment and an increasing employment rate once again makes housing affordable for an average American. This is evident from the increasing number of new housing units owned in the US. Although the current level is still far below the housing units owned in 2006-07, the recent increase in residential construction is a positive signal for the housing industry. In light of the expected economic recovery and a decline in the unemployment rate, this industry will inch closer to the highs achieved in the past. I analyze the three largest and most widely covered housing construction companies in the US.

The three giants

PulteGroup, Inc. (NYSE:PHM) is the largest publicly-traded residential construction company in the US in terms of market capitalization. The company has seen an improvement in all of its operating statistics in 2012, due to an increase in the number of houses sold, new orders received and backlog. The company’s backlog and new orders receipts increased by 35% and 4% respectively, year-over-year. In 2012, the company was able to generate profits for the first time in the last six years. However, the company is expected to continue reporting profits in the midst of improving market conditions.

D.R. Horton, Inc. (NYSE:DHI), the largest company in terms of revenue, has also experienced a substantial improvement in its revenues and margins. The company is expected to continue to dominate the residential construction in the future as well, as its backlog units increased by an amazing 54% in the most recent quarter. In light of a lower order cancellation rate together with a huge increase in new orders placed, the future of the company looks promising. The company has one of the highest margins in the industry. As the economy improves, I believe its margins will return to their historic levels.

Lennar Corporation (NYSE:LEN)Lennar Corporation (NYSE:LEN) has also experienced improved revenues and margins, backed by new orders placed across all regions. The company also offers one of the most attractive dividend yields in the industry. The company’s backlog units increased by more than 80% in the most recent quarter, which provides an indication of better financial results to be reported in the future as well. Current performance of the company is substantially lower than the results reported in early 2000s. Thus, the company has a substantial room for growth. As the company’s revenues and profits improve, I expect the company’s distributions to shareholders to increase as well.

The industry environment

As US economy entered recession, it saw the number of foreclosure filings increase rapidly and then more than double by mid-2008. Furthermore, the high rate of housing units nearing completion created an excess supply of homes in the US economy. The combined result of these two factors was a sharp decline in the prices of houses. Hence, residential construction companies suffered heavy losses as they were unable to sell new properties at a profit.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!