On Tuesday, Raymond James maintained a positive outlook on shares of Taylor Morrison Home (NYSE:TMHC), increasing the price target to $84.00 from $81.00 while keeping an Outperform rating on the stock. The adjustment follows a review of the company's third-quarter results from last week, which showed significant performance.
The analyst from Raymond James highlighted the continued high demand for new homes, expecting the market to improve in 2025. This optimism is supported by record-high customer traffic on builder websites and low resident turnover in rental apartment communities.
However, the analyst noted a recent slowdown in new contract activity across the housing industry due to a mix of factors, including rising mortgage rates, election concerns, seasonal trends, and hurricane impacts in Florida.
Taylor Morrison and other homebuilders are reportedly offering higher selling incentives to maintain sales rates towards the end of the year, which may affect gross margins in the fourth quarter.
Despite these challenges, Raymond James expressed confidence in Taylor Morrison's ability to adapt to varying mortgage rate scenarios and leverage its strong balance sheet and land holdings to drive earnings per share (EPS) growth in the fiscal year 2025.
The firm projects that Taylor Morrison will achieve a return on equity (ROE) close to 17% in the coming year and anticipates around $300 million in accretive stock repurchases. The analyst concluded by stating that Taylor Morrison's diversified business model and resilience through economic cycles justify a higher valuation than its current price-to-earnings (P/E) multiple of 8 times forward earnings.
InvestingPro Insights
Taylor Morrison Home's (NYSE:TMHC) recent performance aligns with several key metrics and insights from InvestingPro. The company's market cap stands at $7.23 billion, reflecting its significant presence in the homebuilding sector. With a P/E ratio of 9.05, which is slightly higher than the 8 times forward earnings mentioned in the article, TMHC appears to be trading at a reasonable valuation considering its growth prospects.
InvestingPro Tips highlight that TMHC has shown a "High return over the last year" and is "Trading near 52-week high," which corroborates the positive sentiment expressed by Raymond James. The stock's 84.46% price return over the past year and its current price at 97.14% of its 52-week high underscore this strong performance.
Moreover, InvestingPro Data shows a quarterly revenue growth of 26.58% in Q3 2024, indicating robust demand for Taylor Morrison's homes, as mentioned in the article. The company's ability to maintain a healthy gross profit margin of 24.54% and an operating income margin of 14.54% in the last twelve months suggests effective management of costs and pricing strategies, even as the industry faces challenges with incentives and mortgage rate fluctuations.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips for TMHC, providing deeper insights into the company's financial health and market position.
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