Lumber prices skyrocketed earlier this year as its demand soared with the strong housing market. This, along with an increase in renovating and upgrading home interiors, coupled with lower production at lumber mills, drove up prices.
However, with the reopening of the economy based on solid progress on the vaccination front, renovation and DIY projects have taken a backseat as people are returning to outdoor activities. Sawmills have picked up the pace of the output, easing the lumber shortage. These factors led to lumber prices plunging more than 40% in June.
As a result, it could be wise to bet on shares of Tri Pointe Homes, Inc. (TPH), Haverty Furniture Companies, Inc. (HVT), Hovnanian Enterprises, Inc. (HOV), and Hooker Furniture Corporation (HOFT) that are expected to benefit from the falling lumber prices.
Tri Pointe Homes, Inc. (TPH)
TPH is engaged in the designing, construction, and sale of single-family attached and detached homes. The company’s homebuilding operation consists of six segments: Maracay Homes, Pardee Homes, Quadrant Homes, Trend maker Homes, TRI Pointe Homes, and Winchester Homes. It also provides financial services such as mortgage financing.
TPH’s home sales revenue of $716.68 million in the first quarter (ended March 31, 2021) represents a 20.5% year-over-year increase. The company’s net income increased 122.1% year-over-year to $70.80 million. Its adjusted EBITDA increased 85.5% from the same period last year to $126.08 million. Its EPS came in at $0.59, up 145.8% year-over-year.
Analysts expect TPH’s EPS and revenue to increase 45.9% and 23.8% year-over-year to $0.89 and $1.03 billion, respectively, for the quarter ending September 30, 2021. Moreover, it surpassed Street EPS estimates in all of the trailing four quarters.
The company announced in January 2021 that it is consolidating its six regional homebuilding brands into one unified name — Tri Pointe Homes. TPH’s CEO Doug Bauer said, “Operating as one brand will allow us to concentrate our functional efforts around one brand instead of six while creating a stronger national awareness for the company.” The stock has rallied 48.3% over the past year to close yesterday’s trading session at $21.37.
TPH’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
It has a B grade for Growth, Value, and Quality as well. Click here to see the additional POWR Ratings for TPH (Sentiment, Momentum, and Stability).
TPH is ranked #5 of 25 stocks in the Homebuilders industry.
Haverty Furniture Companies, Inc. (HVT)
HVT operates as a specialty retailer of residential furniture and accessories in the United States. The company offers mattress product lines such as Sealy, Tempur-Pedic, and Serta. It also offers financing through a third-party finance company and an internal revolving charge credit plan.
The company’s net sales increased 31.8% year-over-year to $236.49 million for the first quarter ended March 31, 2021. HVT’s gross profit increased 35.6% year-over-year to $135.03 million. Its net income came in at $19.41 million, which represents a 966.8% year-over-year rise. Its EPS for the quarter came in at $1.04, up 1,055.6% from the prior year’s quarter.
HVT’s EPS is expected to increase 105.9% year-over-year to $3.87 in fiscal 2021. It surpassed Street EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 97.7% year-over-year to $217.51 million for the quarter ended June 30, 2021.
The company paid a quarterly dividend of $0.25 per share on its common stock on June 16, which represents a 13.6% increase from the previous dividend. HVT’s quarterly dividend for its Class A common stock was also increased from $0.20 per share to $0.23 per share. This reflects its solid financials. The stock has gained 38.7% over the past six months to close yesterday’s trading session at $41.49.
It’s no surprise that HVT has an overall B rating, which equates to Buy representing a promising outlook. The stock has an A grade for Value, Quality, and Momentum. Click here to see HVT’s ratings for Stability, Sentiment, and Growth as well.
HVT is ranked #9 of 65 stocks in the A-rated Home Improvement & Goods industry
Hovnanian Enterprises, Inc. (HOV)
Residential home builder HOV is engaged in the designing, construction, marketing, and sale of single-family detached homes, attached townhomes and condominiums, urban infill, and active lifestyle homes. It operates through two segments: Homebuilding and Financial Services.
HOV’s total revenues increased 30.6% year-over-year to $703.16 million for the fiscal second quarter ended April 30, 2021. The company’s net income for the quarter came in at $488.68 million compared to $4.08 million in the prior-year quarter. Its adjusted EBITDA came in at $76.36 million, up 46.6% year-over-year.
The company’s CEO, Ara K. Hovnanian said, “Despite increased material and labor costs, gross margins on contracts currently in our backlog along with continued strong demand for new homes gave us the confidence to raise our full fiscal 2021 profitability guidance. We believe that the outlook for housing demand will remain strong over the next few years.” The stock has soared 191.3% over the past six months to close yesterday’s trading session at $92.83.
HOV’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary ratings system. The stock has an A grade for Value, and a B grade for Growth. Click here to see HOV’s ratings for Stability, Sentiment, Momentum, and Quality as well.
HOV is ranked #4 in the Homebuilders industry.
Hooker Furniture Corporation (HOFT)
HOFT is engaged in the designing, manufacturing, import, and marketing of residential households, hospitality, and contract furniture. The company operates through three segments: case goods furniture, upholstered furniture, and all others.
HOFT’s net sales increased 55.7% year-over-year to $162.86 million for the fiscal first quarter ended May 2, 2021. The company’s net income for the quarter came in at $9.44 million compared to a loss of $34.82 million in the prior-year quarter. Its EPS came in at $0.78 compared to a loss of $2.95 in the year-ago period.
Analysts expect HOFT’s EPS and revenue to increase 506.8% and 28.4% year-over-year to $3.58 and $693.59 million, respectively, in fiscal 2022. Moreover, it surpassed Street EPS estimates in three of the trailing four quarters.
Jeremy Hoff, the company’s CEO said, “We’re pleased to have surpassed our goal to return to the growth trajectory we were on before the global pandemic and economic downturn.” The stock has soared 77.7% over the past year to close yesterday’s trading session at $34.02.
HOFT’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has an A grade for Sentiment and Momentum, and a B grade for Value and Quality. Click here to see more of HOFT’s component grades.
HOFT is ranked #7 in the Home Improvement & Goods industry.
TPH shares were trading at $22.11 per share on Wednesday afternoon, up $0.74 (+3.46%). Year-to-date, TPH has gained 28.17%, versus a 16.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More…
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