Declining mortgage rates and a shortage of existing homes for sale are benefiting homebuilding companies nowadays amid COVID-19-led disruptions. Taylor Morrison Home Corp. TMHC is not an exception in this regard. The company’s shares jumped 16.9% on Jul 8, after the announcement of record monthly sales orders in June.
June Sales Pace
This Arizona-based homebuilding company — the nation’s fifth largest homebuilder — saw a 94% year-over-year increase in net sales orders last month to 1,715. It also posted a record sales pace per community of 4.3.
The company stated that although economic disruptions caused by COVID-19 mostly impacted the earlier part of the quarter, Taylor Morrison’s second-quarter net sales orders grew 23% year over year and had a sales pace of 2.8.
Second-quarter closings were 3,212, representing an increase of 24% year over year. Sales order backlog of homes under contract grew 35% year over year to 6,805 homes. As of Jun 30, 2020, potential revenues from backlog amounted to $3.2 billion versus $2.5 billion a year ago.
The company experienced solid performance across its portfolio — which includes a broad geographic footprint within 22 top U.S. housing markets across 11 states — and varying price points as well as consumer groups.
Strengthening Virtual Bonds
The COVID-19 pandemic is fast tracking digital transformation in companies. The companies that are able to use technology well to keep going and rethink their business model for the future by fast tracking digital transformation will be the ones ahead of the competition.
In this regard, it pointed out that the swift transition to a virtual sales environment and creation of innovative online tools were key to the company's record success last month.
Taylor Morrison Chairman and CEO Sheryl Palmer said, "Taylor Morrison is also pushing the virtual boundaries from online home shopping to online home buying with our new online home reservation feature, allowing customers to place a 24-hour hold on move-in ready and under-construction homes while they complete the sales agreement."
Share Price Performance
Shares of Taylor Morrison have gained 70.8% over the past three months, outperforming the Zacks Building Products - Home Builders industry’s 33.8% rally. The price performance was backed by rebounding housing demand, buoyed by declining mortgage rates scenario.
Sales of new single-family homes jumped 16.6% in May from April, according to the U.S. Census. In addition to the larger-than-expected monthly surge, May sales were nearly 13% higher than a year ago. Revival of housing demand has been benefiting homebuilding companies like Taylor Morrison and other housing biggies like Lennar LEN, D.R. Horton DHI, KB Home KBH.
Although Taylor Morrison currently carries a Zacks Rank #4 (Sell), its earnings estimates for 2020 have moved 2.4% north over the past 30 days. This reflects analysts’ optimism over the stock’s earnings prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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