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Home builder shares fall after analyst downgrade
Fri Feb 11, 2005 09:53 AM ET
NEW YORK, Feb 11 (Reuters) - Shares of U.S. home builders fell in opening trading Friday, after Smith Barney analyst Steve Kim cut his rating on six stocks to "hold" from "buy."
"It is important to note that this is our first home builder downgrade in over three years," he wrote in a research note.
Kim cut the shares of Beazer Homes USA Inc. (BZH.N: Quote, Profile, Research) , Hovnanian Enterprises Inc. (HOV.N: Quote, Profile, Research) , KB Home (KBH.N: Quote, Profile, Research) , Pulte Homes Inc. (PHM.N: Quote, Profile, Research) , Ryland Group Inc. (RYL.N: Quote, Profile, Research) , and Toll Brothers Inc. (TOL.N: Quote, Profile, Research)
The Dow Jones U.S. Home Construction Index , a wide barometer of home building stock activity, fell 3 prcent, while Hovnanian shares were off more than 6 percent, or $3.60, to $52.90.
Pulte shares were down about 5 percent, or $3.27 to $67.89. KB fell nearly 4 percent, or $4.05 to $112.39. Toll was off about 4 percent, or $3.25, to $82.
Home builder Ryland, which was down 5 percent, Pulte, Hovnanian, Standard Pacific Corp. (SPF.N: Quote, Profile, Research) , M/I Homes Inc.(MHO.N: Quote, Profile, Research) , which was down 8 percent, were among the top percentage losers on the New York Stock Exchange.
"We continue to believe that that market continues to grossly underestimate the earnings power and resiliency of the public home builders," Kim wrote in a research note, "and our long-term bias remains decided in favor of owning this group, we doubt their recent run-up will prove to be the transcendent move that takes valuations into the low to mid teens."
Kim said he expect the group to "experience a temporary plateau in stock prices, as the pace of earnings revisions slows."
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