On Thursday, RBC Capital Markets maintained an Outperform rating on Taylor Morrison (NYSE:TMHC) Home Corporation (NYSE:TMHC), raising the price target to $74 from the previous $63. The firm's revised earnings per share (EPS) estimates for the company now stand at $8.07 for 2024, marking a 3% increase, and at $8.20 for 2025, a 4% rise.
The adjustment reflects improved gross margin percentages and a management team that noted an uptick in demand in July after a second-quarter order shortfall. This resurgence aligns with long-term seasonal trends and supports a low-3% sales pace for the entire year.
The report highlighted that while incentives have decreased compared to previous quarters and years, they still vary depending on the market. Despite this, the firm sees the current risks associated with demand and margins staying elevated until there is significant mortgage rate relief. Nevertheless, RBC Capital Markets views the improved return on equity (ROE) profile of Taylor Morrison Home as undervalued, which has led to the upward revision of the price target.
The analysis by RBC Capital Markets indicates that Taylor Morrison Home's sales dynamics are stabilizing, with the company experiencing a return to expected seasonal patterns. The firm's commentary underscores the importance of mortgage rates in the housing market's health, suggesting that current market conditions continue to pose challenges for demand and profitability.
The upgrade in the price target to $74 reflects confidence in Taylor Morrison Home's strategy and performance amidst a complex housing market. The firm's analysis suggests that while there are risks, there are also reasons to believe in the company's potential for growth and value creation.
In other recent news, Taylor Morrison Home Corporation showcased a strong performance in the second quarter of 2024, with adjusted earnings reaching $1.97 per diluted share and a 12% increase in year-over-year book value per share. The homebuilder delivered 3,200 homes at an average price of $600,000 and reported a net income of $199 million for the quarter. The company's land inventory currently stands at 80,677 lots, with plans to control 60% to 65% shortly.
Taylor Morrison also highlighted plans, which include a projected full-year land investment between $2.3 billion and $2.5 billion. The company expects to deliver between 12,600 to 12,800 homes in 2024, maintaining a gross margin of around 24%. These recent developments suggest a positive outlook for the company, despite potential headwinds such as lot cost inflation and a 9.4% cancellation rate of gross orders.
Analysts noted the company's recovery momentum due to lower interest rates and positive Federal Reserve messaging, and its well-positioned portfolio to meet housing market demand. They also mentioned the company's strategic land investments and focus on prime community locations as key factors in its continued growth.
InvestingPro Insights
Recent data from InvestingPro shows that Taylor Morrison Home Corporation (NYSE:TMHC) is trading near its 52-week high, with the price currently at 96.93% of this peak. This is a testament to the company's robust performance in the market, as reflected in a strong return over the last month of 18.74% and an impressive 31.08% over the past year. These figures underscore the company's momentum and align with RBC Capital Markets' optimistic view of the stock.
InvestingPro Tips highlight that Taylor Morrison Home's liquid assets exceed its short-term obligations, which could provide financial flexibility and resilience in a fluctuating market. Additionally, analysts predict that the company will be profitable this year, a sentiment supported by a profitable track record over the last twelve months. These insights may offer investors additional confidence in the company's financial health and future prospects.
With a P/E ratio standing at 9.79 and an adjusted P/E ratio for the last twelve months as of Q2 2024 at 8.91, the company's valuation appears attractive, especially when considering the strength of its recent returns. For readers looking to delve deeper into the financials and forecasts for Taylor Morrison Home Corporation, InvestingPro offers additional tips and a fair value estimate, suggesting further analysis could be beneficial. Interested investors can unlock these insights and receive up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription using the coupon code PRONEWS24. There are 6 more InvestingPro Tips available for TMHC, providing a comprehensive view of the company's performance and outlook.
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