On Monday, BTIG upgraded shares of Taylor Morrison (NYSE:TMHC) Home Corporation (NYSE:TMHC) from Neutral to Buy, setting a price target of $78.00. The upgrade comes after virtual investor meetings with the company's management last week, which bolstered the firm's confidence in Taylor Morrison's long-term growth strategy and valuation.
Taylor Morrison's stock currently trades at 1.17 times its book value, which is the second least expensive in BTIG's coverage universe. The group average stands at twice the book value. BTIG's decision is also influenced by the company's expected return on equity (ROE), which is anticipated to be over 15% in the next four quarters. The price target of $78.00 is based on 1.5 times the current book value per share.
Taylor Morrison has been focusing on construction and pricing efficiencies within its core move-up and resort lifestyle businesses, which make up about two-thirds of its mix. This focus on efficiency is expected to lead to quicker inventory turns and improved margins.
Moreover, with nearly seven years of land supply, BTIG sees potential for Taylor Morrison to increase store count growth and deliveries while flattening new land spending post-2025. This strategy could free up cash and possibly enhance share repurchase activities.
The company's presence in the high-margin resort lifestyle segment, which constitutes about 20% of its mix and faces limited competition from public peers, is also a positive factor. Taylor Morrison's diverse market spread across 12 states and 20 markets, coupled with a conservative balance sheet—marked by a 28% debt-to-capital ratio—further supports the upgrade.
BTIG notes that the market is currently not fully recognizing Taylor Morrison's potential for long-term improvements. The firm believes that even the near-term earnings per share (EPS) and return prospects are being undervalued. The $78.00 price target reflects BTIG's expectation that Taylor Morrison's stock will trade in line with its near-term returns.
In other recent news, Taylor Morrison Home Corporation has been the subject of multiple developments. RBC Capital Markets recently maintained an Outperform rating on the homebuilder, raising the price target to $74 from $63. The firm's revised earnings per share (EPS) estimates for the company now stand at $8.07 for 2024, marking a 3% increase, and at $8.20 for 2025, a 4% rise. This adjustment reflects improved gross margins and a noted uptick in demand.
Taylor Morrison showcased strong performance in the second quarter of 2024, with adjusted earnings reaching $1.97 per diluted share and a 12% increase in year-over-year book value per share. The company delivered 3,200 homes at an average price of $600,000 and reported a net income of $199 million for the quarter.
The company also revealed plans for a projected full-year land investment between $2.3 billion and $2.5 billion, with the expectation to deliver between 12,600 to 12,800 homes in 2024. Analysts noted the company's recovery momentum due to lower interest rates and positive Federal Reserve messaging, and its well-positioned portfolio to meet housing market demand.
These recent developments suggest a positive outlook for Taylor Morrison, despite potential headwinds such as lot cost inflation and a 9.4% cancellation rate of gross orders.
InvestingPro Insights
In light of BTIG's recent upgrade of Taylor Morrison Home Corporation (NYSE:TMHC), InvestingPro data and insights provide additional context to the company's financial health and market position. Taylor Morrison's current market capitalization stands at $6.42 billion, with a price-to-earnings (P/E) ratio of 9, reflecting a market valuation that is below the industry average. This suggests a potentially undervalued stock, given the company's profitability over the last twelve months.
InvestingPro Tips highlight that management's aggressive share buyback strategy and analysts' upward revisions of earnings for the upcoming period reflect confidence in the company's financial strategy and future performance. Moreover, with a strong return over the last five years and a price currently at 88.44% of its 52-week high, the company's stock price movements indicate resilience and potential for growth. It's also noteworthy that Taylor Morrison's liquid assets exceed its short-term obligations, providing financial stability.
For investors seeking a deeper analysis, there are over 7 additional InvestingPro Tips available, which offer insights into Taylor Morrison's performance metrics and investment potential. These tips can be accessed through the InvestingPro platform for those looking to make an informed investment decision.
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