PulteGroup, Inc. (PHM), Beazer Homes USA, Inc. (BZH), Standard Pacific Corp. (SPF): 3 Housing Companies Focused on Margin Improvement

Improving margin and strategic acquisition

Standard Pacific Corp. (NYSE:SPF) reported a home sales gross margin of 21% in the first quarter of 2013, as compared to 20.3% in same quarter a year ago. Increased prices and order growth drove this margin improvement. During this quarter, the average sales price was up 9% year-over-year at $375,000, and new order growth was up 49% year-over-year. The company reported 527 new orders in April 2013, with an average sale price of $396,000. The company expects order growth of 39% this year, and it will increase its average sales price across all of its markets. This will result in improvements to its gross margin, which will be 23% this year and 24.6% next year.

On June 14, 2013, Standard Pacific Corp. (NYSE:SPF) announced the acquisition of homebuilding assets from Centerline Homes. The acquisition will strengthen the company’s growth strategy by increasing its land supply, community count, and strengthening its position in important markets. The acquisition gives the company control of approximately 3,000 home sites with 30 current and future communities in Florida and the Carolinas. These states are important markets and together contribute 24% of the company’s total revenue. This will increase total revenue to $1.9 billion this year, as compared to $1.2 billion last year.

Conclusion

All of these housing companies are going to benefit from increasing home prices, with the increases resulting in higher gross margins. PulteGroup, Inc. (NYSE:PHM)’s wide geographic exposure will help it to take advantage of recovery in the U.S housing market. Beazer Homes USA, Inc. (NYSE:BZH) is increasing its spending on land and entering agreements to grow its community count, which will in turn drive its profitability. Standard Pacific Corp. (NYSE:SPF)’s asset acquisition from Centerline Homes and order growth will enhance its revenue and margin. Due to margin improvement and community count growth, a buy is recommended for all three stocks.

Shweta Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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