NEW YORK (TheStreet) -- The foundations for the 11 homebuilders in the PHLX Housing Sector Index were shaken on Thursday on a report that sales of new single-family homes during June missed estimates.
Also on Thursday, earnings from homebuilders D.R. Horton (DHI - Get Report) and PulteGroup (PHM - Get Report) missed analysts' estimates. Since my post on June 18 covering the 19 stocks in the housing sector index, shares of D.R. Horton are down 6.6%, followed by Lennar (LEN - Get Report), which is down 4.9%, and Toll Brothers (TOL - Get Report), which is down 4.6%.
Bigger losses in the index come from Radian Group (RDN - Get Report) and Owens Corning (OC - Get Report), which are both down 14% since June 17. Radian provides private mortgage insurance and Owens provides insulation, roofing and siding.
Let's take a look at three important housing data releases.
On July 16, the National Association of Home Builder Housing Market Index rose four points, moving above the neutral 50 to 53. The graph above shows this rise, but does not show the weaker-than-expected reading for single-family housing starts for June that were reported on July 17.
Single-family starts plunged 9% to a seasonally adjusted annual rate of just 575,000 units in June, back below the 600,000 threshold I have been tracking. Single-family starts continue to track below the normal 1 million to 1.2 million annual rate of production.
On Thursday, U.S. Census Bureau reported that new-home sales plunged 8.1% in June to a seasonally adjusted annual rate of just 406,000 units when analysts were expecting 510,000. The inventory of new homes is at a 5.8 month supply at 197,000 units in June.
Notice the "sea of red" in the first "crunching the numbers" table as 14 of the 20 stocks in the table are below their five-week modified moving averages. On June 18 only four were below.
Also notice that 15 of 20 stocks have declining 12x3x3 weekly slow stochastic readings. The table on June 18 showed 17 of 20 with rising 12x3x3 weekly slow stochastic readings.
Here are the profiles, the "crunching the numbers" tables follows:
Beazer Homes (BZH - Get Report) ($18.71) is not a component of housing sector index. This homebuilder is scheduled to report quarterly results on July 31; analysts expect the company to report a loss of 15 cents per share. On July 1, Beazer tested its quarterly risky level at $21.17.
D.R. Horton ($21.94) posted earnings of 32 cents a share on Thursday, missing analysts' estimates of 49 cents. The stock traded as high as $25.23 on July 2, above a semiannual pivot at $23.01 but below its quarterly risky level at $25.79. Thursday's low at $21.87 tested the stock's 200-day simple moving average at $21.86.
Hovnanian (HOV - Get Report) ($4.46) is scheduled to report quarterly results on Sept. 8; analysts expect the company to report earnings of 7 cents per share. The stock traded as high as $5.31 on June 30, above semiannual risky levels at $4.68 and $5.04.
KB Home (KBH - Get Report) ($17.72) reported quarterly results on June 27 and beat analysts' estimates by 6 cents, earning 27 cents per share. The stock traded as high as $18.98 on July 2. Recent weakness has held its 200-day SMA at $17.46.
Lennar ($39.27) reported quarterly results on June 26, and beat analysts' estimates by 10 cents, earning 61 cents per share. The stock traded as high as $42.67 on July 1. Its semiannual risky level remains at $44.34.
MDC Holdings (MDC - Get Report) ($28.83) reports quarterly results on July 29; analysts expect the company to report earnings of 44 cents per share. The stock traded as high as $30.86 on July 1, testing its monthly risky level at $30.71.
M/I Homes (MHO - Get Report) ($21.91) reported results on Thursday and beat analysts' estimates by a penny, earning 31 cents per share. The stock traded as high as $24.92 on July 1, shy of its semiannual risky levels at $25.87.
Meritage Homes MTH ($41.44) reported results on Thursday and beat analysts' estimates by 4 cents, earning 85 cents per share. The stock tested and stayed below its 200-day SMA at $43.03 on July 1 and July 23. A monthly pivot is $41.57 with its semiannual risky level at $44.69.
PulteGroup ($19.24) reported results on Thursday and missed analysts' estimates a penny, earning 25 cents. The stock traded as high as $20.64 on July 1, testing its semiannual risky level at $20.51.
Ryland Group (RYL) ($37.44) is scheduled to report quarterly results next Thurdsay. Analysts expect the company to report earnings of 70 cents per share. The stock failed at its 200-day SMA at $40.03 on July 1.
Standard & Pacific (SPF) ($8.01) is scheduled to report quarterly results next Thursday. Analysts expect the company to report earnings of 13 cents per share. The stock traded as high as $8.81 on July 1, with monthly and semiannual risky levels at $9.01 and $9.74, respectively.
Toll Brothers ($34.55) is scheduled to report quarterly results on Aug. 20. Analysts expect the company to report earnings of 46 cents per share. The stock traded as high as $37.61 on July 2, with a semiannual and quarterly risky levels at $35.71 and $39.60, respectively.
Armstrong World (AWI - Get Report) ($55.09) -- a designer of cabinets, ceilings and floors -- is scheduled to report quarterly results on Monday. Analysts expect the company to report earnings of 65 cents per share. The stock traded as high as $58.28 on July 2, and as low as $51.28 on July 10. The high was above monthly and quarterly risky levels at $56.24 and $57.47, respectively.
Fidelity National Title Group (FNF - Get Report) ($27.58) -- a title insurance company -- is scheduled to report quarterly results on Wednesday. Analysts expect the company to report earnings of 49 cents per share. The stock traded as high as $28.90 on July 1 versus its semiannual pivot at $29.16 with a semiannual risky levels at $34.13.
Lennox International (LII - Get Report) ($90.16) -- an air-conditioning and heating company -- reported quarterly results on July 21, and matched analysts' estimates with earnings of $1.51 per share. The stock held its 200-day SMA at $85 56 on July 21.
Masco (MAS - Get Report) ($20.60), a home-improvement and building-products company, is scheduled to report quarterly results on Monday. Analysts expect the company to report earnings of 28 cents per share. The stock has been below its 200-day SMA at $21.56 since July 10.
Owens Corning ($35.29) reported earnings of 38 cents per share on Wednesday, falling 9 cents short of estimates. The stock traded to a new 2014 low at 35.25 on Thursday. The stock broke below its 200-day SMA at $40.17 on June 20.
Radian Group($13.24) traded as high as $15.55 on June 24, and fell below its 200-day SMA at $14.54 on July 7 to a 2014 low at $12.84 on July 17. A semiannual value level is $10.66 with a monthly pivot at $14.95 and quarterly risky level at $20.38.
Vulcan Materials (VMC - Get Report) ($65.95), a concrete and cement company, is scheduled to report quarterly results on Aug. 7. Analysts expect the company to report earnings of 37 cents per share. A semiannual value level is $57.68 with an annual risky level at $68.52.
Weyerhaeuser (WY - Get Report) ($32.05), a timber and forest products company, is scheduled to report quarterly results next Friday. Analysts expect the company to report earnings of of 34 cents per share. The stock traded as high as $33.75 on July 3, with a semiannual pivot at 31.08 and quarterly risky level at $36.65.
Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics
This table provides the technical status for the stocks profiled in today's report.
I show the 12-month trialing price to earnings ratios and dividend yields.
There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.
The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.
Interpretations: Stocks below a moving average are listed in red.
Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.
A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.
A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.
A stock with a neutral technical rating has a profile that is not positive or negative.
The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon.
The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.
The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.
The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six to 12-month horizon.
Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell
This table presents the date the company reported EPS, the beat or miss of analysts estimates and the reported earnings per share, and where to buy on weakness and where to sell on strength.
EPS Date is the day the company reported or will report their quarterly results.
Beat / Miss - in red is a miss, in black is a beat. If blank the company has not reported quarterly results yet.
Reported EPS is the earnings per share reported for the last quarter. If the Beat / Miss is blank, this column is the analysts earnings per share estimates.
Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.
Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staffTheStreet Ratings team rates D R HORTON INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate D R HORTON INC (DHI) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, increase in net income, attractive valuation levels, increase in stock price during the past year and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- DHI's revenue growth has slightly outpaced the industry average of 17.7%. Since the same quarter one year prior, revenues rose by 21.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Household Durables industry average. The net income increased by 17.9% when compared to the same quarter one year prior, going from $111.00 million to $130.90 million.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- D R HORTON INC has improved earnings per share by 18.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, D R HORTON INC reported lower earnings of $1.34 versus $2.74 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.34).
- You can view the full analysis from the report here: DHI Ratings Report