BOSTON (TheStreet) -- Homebuilders' stocks have jumped an average of 31% this year but are now looking overpriced, given the muddled outlook for new-home demand for the rest of 2012.
Standard & Poor's has a "negative" outlook on the homebuilding industry as it expects "only a slight recovery" for the balance of this year. The research firm has "hold" recommendations on the industry's leaders, KB Home (KBH), Lennar (LEN) and D.R. Horton (DHI), and a "sell" on its biggest player, PulteGroup (PHM), after its 56% gain this year.
The broader S&P 500, in contrast, is up 12% this year.
Home-improvement retailers Lowe's (LOW) and Home Depot (HD) are also looking pricey after each has gained about 24% this year, so S&P has "sell" ratings on those two as well. But it's a different story for many of the building industry's suppliers. Although some have had share-price gains of as much as 78% this year, many are still getting analyst "buy" recommendations as they are seen benefiting from continued sales to their commercial and industrial customers, home remodelers, as well as the new-home builders gearing up for an expected busy summer building season. Housing-products bellwether Masco (MAS) brought that home April 30, as the kitchen cabinets and plumbing fixtures manufacturer reported a better-than-expected first quarter, including a 7% sales increase. "North American housing activity appears to be improving, and we continue to believe we are positioned to outperform the industry recovery," CEO Tim Wadhams said in a statement. After trailing the S&P 1500 in 2011, the S&P Building Products Index gained 18.5% in the first quarter versus the 12% advance of the S&P 1500. S&P has a "neutral" outlook for the industry now. Here are eight building materials suppliers' stocks representative of various segments of the industry, ranked in inverse order of the number of analysts' "buy" ratings:
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