Pulte Upgrade Lifts Homebuilders (PHM, KBH, LEN)

Shares of homebuilders got a boost when analysts at Williams Financial Group upgraded its rating on PulteGroup from Hold to Buy on Wednesday. They also raised the price target from $13.00 to $17.00, well above the consensus estimate according to Thomson/First Call. Despite some signs that the housing market may have bottomed, at least in some places, sentiment about the sector remains mixed. The share price of PulteGroup PHM is about 140 percent higher year-to-date and reached a multiyear high in the wake of the upgrade. But only nine of 22 analysts surveyed by Thomson Reuters recommend buying shares. As with many of these homebuilders, the share price has overrun the mean price target of analysts. K.B. Homes KBH was up about five percent in afternoon trading and seems to be set to retake the 52-week high. The share price is about 85 percent higher year-to-date. More analysts recommend buying shares than selling them, but the vast majority of analysts polled remain neutral. Lennar KBH also reached a new 52-week high Wednesday, after rising about 73 percent since the beginning of the year. The return on equity is about 17.5 percent and earnings per share (EPS) are forecast to have more than doubled year over year when Lennar reports results on September 24. Shares of Beazer Homes BZH have popped about nine percent in the past week. The share price has nearly rebounded from a sell-off in July following the announcement of a stock offering. Only four of 12 analysts polled recommend buying shares. The mean price target is less than the current share price. D.R. Horton DHI reached a new 52-week high Wednesday, despite being up less than two percent in the afternoon. The share price is about 58 percent higher year-to-date. The return on equity is more than 29 percent and the price-to-earnings (P/E) ratio is less than the industry average. Hovnanian Enterprises KBH also reached a new 52-week high Wednesday, despite rising less than two percent on the day. In fact, the share price rose about 12 percent in the past week. The long-term EPS growth forecast is about 10 percent, and revenues are expected to rise 27 percent this year. The share price of Toll Brothers TOL was up about four percent late in the day, and also reached a new high it has not seen since before the housing market crashed in 2007. The long-term EPS growth forecast is about 15 percent, and revenues are expected to rise about 22 percent this year. On the exchange traded fund front: iShares Dow Jones U.S. Home Construction ITB is up more than 105 percent year-to-date, SPDR S&P Homebuilders XHB is up about 77 percent and PowerShares Dynamic Building & Construct PKB is up almost 48 percent. All three of these ETFs reached a new 52-week high Wednesday.