CalAtlantic (CAA) Buys Home South, Gains Additional Homesites

CalAtlantic Homes (NYSE:CAA) acquired the homebuilding operations of Georgia-based Home South Communities, one of the largest privately-held homebuilders in the Atlanta metro market.

CalAtlantic now owns and controls an additional 970 home sites across 17 communities, seven of which are actively selling. The rest of the communities are expected to start actively selling in 2018. Hence, the addition of Home South Communities will further strengthen CalAtlantic's presence in Atlanta. CalAtlantic has also offered opportunities to employees of Home South Communities.

Acquisition is an important part of CalAtlantic's growth strategy. Earlier, the company announced entry into two of the top 20 markets with a start-up in Salt Lake City and an acquisition in Seattle. The company purchased home building operations of leading Seattle land developer Oakpointe Communities. CalAtlantic now owns or controls over 1,850 lots in this land constrained market and is targeting the entry level, first move up and active adult buyers.

Importantly, CalAtlantic is about to get acquired by Lennar Corp. (NYSE:LEN) in a $9.3-billion deal. This combined business is expected to create one of the country’s largest homebuilder.

Post completion in the first quarter of 2018, Lennar and CalAtlantic will control nearly 240,000 homesites nationwide. The combined company will cover approximately 50% of the U.S. population and is expected to generate roughly $250 million in annual cost savings, with about $75 million expected in fiscal 2018. The savings include lower overhead costs and elimination of duplicative corporate expenses.

Price Performance

CalAtlantic’s shares have gained more than 56% in the last three months, surpassing 26% growth of its industry. Also, the company has outperformed the industry in each of 4-week, 12-week and 52-week time frames.

Moreover, estimates for the current quarter have been stable over the last 30 days but have increased 0.3% for 2017.

Zacks Rank & Stocks to Consider

CalAtlantic carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the sector are United Rentals, Inc. (NYSE:URI) and Patrick Industries, Inc. (NASDAQ:PATK) , .

United Rentals sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Rentals is expected to see a 22.1% rise in 2017 earnings.

Patrick Industries carries a Zacks Rank #2 (Buy) and is expected see 24.3% growth in earnings in 2017.

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