Beazer Homes: Growth Ambitions May Be Derailed By Macro Forces

seekingalpha2024-11-26

Beazer Homes faces challenges with high interest rates, lower buyer affordability, and increased construction costs, leading to skepticism about its growth plans.Despite a revenue increase in fiscal ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2486201017?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/144280696/image_144280696.jpg","is_english":true,"pubTime":"2024-11-26 13:16","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2486201017","market":"sh","top_or_hot":-1,"title":"Beazer Homes: Growth Ambitions May Be Derailed By Macro Forces","media":"seekingalpha","content":"<div>\n<p>Beazer Homes faces challenges with high interest rates, lower buyer affordability, and increased construction costs, leading to skepticism about its growth plans.Despite a revenue increase in fiscal ...</p>\n\n<a href=\"https://seekingalpha.com/article/4740239-beazer-homes-stock-q4-growth-ambitions-may-be-derailed-by-macro-forces\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Beazer Homes: Growth Ambitions May Be Derailed By Macro Forces</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBeazer Homes: Growth Ambitions May Be Derailed By Macro Forces\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-26 13:16 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4740239-beazer-homes-stock-q4-growth-ambitions-may-be-derailed-by-macro-forces><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Beazer Homes faces challenges with high interest rates, lower buyer affordability, and increased construction costs, leading to skepticism about its growth plans.Despite a revenue increase in fiscal ...</p>\n\n<a href=\"https://seekingalpha.com/article/4740239-beazer-homes-stock-q4-growth-ambitions-may-be-derailed-by-macro-forces\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BZH","symbol_name":"贝哲房屋","start_time":0,"source_url":"https://seekingalpha.com/article/4740239-beazer-homes-stock-q4-growth-ambitions-may-be-derailed-by-macro-forces","article_id":"2486201017","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/144280696/image_144280696.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2486201017","pubTimestamp":1732598166,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Beazer Homes faces challenges with high interest rates, lower buyer affordability, and increased construction costs, leading to skepticism about its growth plans.Despite a revenue increase in fiscal 2","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BZH":"贝哲房屋","BK4088":"住宅建筑"},"translate_title":"Beazer Homes：增长雄心可能会因宏观力量而脱轨","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"BZH":0.9},"content_text":"Beazer Homes faces challenges with high interest rates, lower buyer affordability, and increased construction costs, leading to skepticism about its growth plans.Despite a revenue increase in fiscal 2024, rising costs caused a drop in gross profit and operating income, straining cash flow.The company plans to expand its inventory and community developments, but lower backlog and higher cancellation rates pose risks.BZH's low P/E ratio is attractive, but free cash flow burn combined with a desire to deleverage has me concerned about dilution.miflippo  Introduction Homebuilding company Beazer Homes (NYSE:BZH) has seen its shares seesaw throughout 2024. The company is navigating the challenges of the housing market, with interest rates and home affordability being uncharacteristically high combined with a period of low housing supply. Last year, I wrote about why I was investing in Beazer's high-yield debt. Now, Beazer's debt has rallied to where its returns are lower than its peers and the company is gambling its future on growth in the housing sector, and the company's performance and timing has me skeptical to take a long position. FINRA Beazer Homes Full Fiscal Year Results After pulling back in fiscal year 2023, Beazer's revenue bounced back with a $125 million increase to over $2.3 billion. Unfortunately, the company's construction and sales costs rose by more than revenue, causing gross profit to drop $18 million to $424 million. The company also saw increases in fixed costs, which lowered its operating income by $34 million to $143 million. SEC 10-Q One key factor driving the drop in margins is the average sale price. While a drop from $518,000 to $515,000 may not seem significant, it becomes problematic when combined with the increased cost pressures being faced by the construction industry. Beazer's sale price headwinds are mirrored by the economy, which is experiencing a period of the slowest housing price growth since the Great Recession. Earnings Release Urban Institute The Balance Sheet and Cash Flow Highlight Investments in Growth Most of Beazer Home's assets consist of the inventory of homes that the company is building and plans to sell and most of the company's liabilities consist of long-term debt. The company grew its inventory by more than $275 million during the last fiscal year to over $2 billion. Long-term debt rose by less than $50 million. Shareholder equity rose to $1.23 billion. SEC 10-Q Beazer was able to finance most of its inventory growth using its cash balance during fiscal year 2024. The company's operating cash flow dropped by $315 million to a cash flow burn of $137 million, mainly due to the $282 million build in inventories and the $18 million decline in operating performance. The company nominally increased its borrowing, but mainly used its cash on hand to cover the inventory build, which led to a $143 million drop in cash to $242 million. SEC 10-Q SEC 10-Q Future Growth Plans While examining Beazer's financials and discovering the company's inventory investment, I assumed there would be a focus on selling inventory next year, but that does not appear to be the case. In fact, the company appears to be poised to make additional investments in inventory, which will continue to strain operating cash flows. Beazer currently is developing 162 communities with plans to grow to over 200 active communities by the end of fiscal year 2026. Earnings Presentation The company is also expecting a tick up in sales. After selling 2.2 houses per community, the company is projecting a range of 2.5 to 3 houses per community in 2025. Additionally, Beazer is projecting the average sale price to rise above $530,000 per house, which may be less than 3%, but a figure I consider to be ambitious considering the macroeconomic price trends in housing. It does not help that housing outlooks for 2025 are being lowered. Earnings Presentation As Beazer is ramping up its growth efforts, the US economy is seeing slower price growth and a greater inventory build. As of October, the total months supply of housing in the U.S. grew to 4, which was the highest level since the outbreak of the pandemic and slightly higher than some levels recorded in 2018 and 2019. In fairness to Beazer, the current inventory build in the US economy is still below historical norms, but poor housing affordability has been a block in the road as mortgage costs relative to income are higher than during the mid-2000s. Urban Institute Earnings Presentation Comparing Beazer to Larger Peers—A Very Mixed Bag The main statistic that attracted me to looking at Beazer's shares was its P/E ratio of under 8 times trailing earnings. The P/E ratio is noticeably lower than the larger publicly traded homebuilders and analysts are optimistic that the company will see strong earnings growth in 2026. A low valuation combined with strong estimated earnings growth seemed like a green light to invest. Seeking Alpha Seeking Alpha I was stopped in my tracks when I compared Beazer's free cash flow per share to its competitors. Beazer is engaging in free cash flow burn to grow its business while its larger competitors are generating solid free cash flow returns. This places Beazer in a highly susceptible position should its growth plans not lead to higher sales and higher margins. Seeking Alpha Further Signs of Future Stress In addition to the macro environment, there are signs within Beazer Homes that trouble may lie ahead. The company's backlog, which stood at 1,711 units at the end of last fiscal year, fell to 1,482 units at the end of fiscal year 2024. While sales were slightly up, the other culprit behind the drop in backlog is cancellation rates, which rose to the second-highest level in the last five fiscal years. Earnings Release Earnings Presentation Lastly, management stated in the conference call and presentation that it intends to further deleverage and reduce debt over the next few years. I'm having a hard time seeing that happen if the company is going to burn cash to build inventory. Beazer does not face another debt maturity until 2027, and it does have $300 million of capacity in an unused line of credit to draw from, but I can't see growth and debt reduction occurring without the issuance of shares, which would also hurt the price. SEC 10-Q SEC 10-Q Conclusion  Beazer Homes has ambitions to grow, but I believe the current macro environment may throw a wrench in the company's big plans. I don't believe in rating the shares a \"sell,\" because they are currently trading at a low valuation, but I also don't see much future upside to the shares. I'm still holding the 2029 maturing bonds as they represent a great return relative to my cost, but the bonds are priced too high to add to that investment. The swings in share price of 2024 will likely continue through 2025, but I will be monitoring for signs of improving macroeconomic data, which would likely get me to buy.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.30.0","shortVersion":"4.30.0","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2486201017"}