Shares of small cap ($319 million) home builder Beazer Homes (BZH) are up 6 cents, or 1%, at $5.13, after Credit Suisse’s Daniel Oppenheim this morning initiated coverage of the stock with a “Neutral” rating and a $5.75 price target, writing that orders are improving, but the company also must deal with ongoing impairments to its properties, high leverage, and high overhead costs.
Debt is 59% of capital, Oppenheim writes, which overshadows the 18% order growth the firm is likely to see this year, and the 17% growth next year.
Furthermore, home sales trends will weaken in the near-term as foreclosures and short sales continue, and the homebuyer tax credit goes away. (Today’s existing home sales report gave a lift to builders, with a larger-than-expected increase from March to April.)
Oppenheim’s $5.75 target is a 15% premium to his 2011 book value per share estimate of $4.94.
Citigroup last week raised the bank’s rating on Beazer to “Buy” with a $7 price target.
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