The Irvine, CA-based home-builder's large size and national footprint will be an advantage in a housing market that is growing at a steady and geographically inconsistent pace, MKM Partners said.
CalAtlantic Group, which was created earlier this month when Standard Pacific and Ryland Group completed their merger, will report its third quarter earnings after the market close on Nov. 4.
"We anticipate that the next few earnings reports could be a bit messy and complex, especially given that 3Q will not even include Ryland results," MKM Partners said. "We anticipate that some investors may wait for some of the dust to settle before taking positions."
Shares of CalAtlantic Group closed down by 5.15% to $37.78 on Thursday.
Separately, TheStreet Ratings team rates CALATLANTIC GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate CALATLANTIC GROUP INC (CAA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, disappointing return on equity and poor profit margins.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CAA's revenue growth has slightly outpaced the industry average of 10.0%. Since the same quarter one year prior, revenues rose by 18.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The debt-to-equity ratio of 1.29 is relatively high when compared with the industry average, suggesting a need for better debt level management.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Household Durables industry and the overall market, CALATLANTIC GROUP INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: CAA