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Why You Should Add Taylor Morrison (TMHC) to Your Portfolio

Taylor Morrison Home Corporation TMHC benefits from solid to-be-built and spec home sales, strategic operational enhancements and growth in its land portfolio.

TMHC reported impressive first-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate by 34.9% and 8.3%, respectively. Also, the bottom line grew year over year by 20.8%. The upside was attributable to typical seasonal demand patterns along with the company’s consistent operational enhancements.

Shares of Taylor Morrison have increased 55% in the year-to-date period compared with the Zacks Building Products - Home Builders industry’s growth of 34.6%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Taylor Morrison delivered a trailing four-quarter earnings surprise of 17.3%, on average. Earnings estimates for 2023 have moved north to $6.71 per share from $6.46 per share over the past 60 days. This depicts analysts' optimism over the company’s growth prospects. Moreover, the company has a strong VGM Score of A, backed by a Value Score of A and a Growth Score of B.

Let us discuss the growth factors broadly.

Factors Favoring Taylor Morrison

Taylor Morrison’s focus on to-be-built and spec homes is resulting in increased growth momentum despite ongoing macroeconomic challenges. The company’s favorable mix of 60% spec home and 40% to-be-built since the past few quarters have added to the uptrend.

Since the fourth quarter of 2022, to-be-built margins have exceeded spec home margins due to a high-margin option and a lot of premium revenues earned from the to-be-built strategy, wherein buyers customize their homes. In the first quarter of 2023, the company’s to-be-built margins were up by about 480 basis points (bps) year over year.

TMHC’s persistent focus on operational enhancements has resulted in increased service delivery efficiencies along with a wide range of its portfolio. These factors eventually lead to increased demand and a competitive edge over its peers. The company’s geographical spread of its operating segments ensures facilitating the optimization of purchases, construction and sale procedures, innovation in the design and quality of its products and improving customer experience.

Also, Taylor Morrison’s digital initiatives add to its growth trend. In October 2022, the company launched the To-Be-Built 2.0 Reservation System, an upgraded version of the To-Be-Built 1.0 Reservation System launched in March 2021. The new system involves an interactive visualizer, providing customers with the experience of building a home online. This initiative aligns with the increasing digital shopping demand and ensures to meet customer demands.

Being a leading land developer, Taylor Morrison’s controlled homebuilding lots as a proportion of the total lot supply were 42% in the first quarter of 2023, up from 32% in the prior-year quarter. As of the first quarter, the company has 73,000 owned and controlled lots, which are expected to drive future growth for the company.

Zacks Rank & Other Key Picks

TMHC currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks that investors may consider from the Construction sector include Martin Marietta Materials, Inc. MLM, Vulcan Materials Company VMC and Watsco, Inc. WSO.

Martin Marietta currently sports a Zacks Rank #1. MLM delivered a trailing four-quarter earnings surprise of 31%, on average. Shares of the company have rallied 25.9% in the year-to-date period.

The Zacks Consensus Estimate for MLM’s 2023 sales and EPS indicates growth of 19% and 32.1%, respectively, from the previous year’s reported levels.

Vulcan Materials currently sports a Zacks Rank #1. VMC has a trailing four-quarter earnings surprise of 7.1%, on average. Shares of the company have risen 17.8% in the year-to-date period.

The Zacks Consensus Estimate for VMC’s 2023 sales and EPS indicates growth of 5.9% and 26.2%, respectively, from the previous year’s reported levels.

Watsco currently carries a Zacks Rank #2. WSO delivered a trailing four-quarter earnings surprise of 5.3%, on average. Shares of the company have rallied 40% in the year-to-date period.

The Zacks Consensus Estimate for WSO’s 2023 sales and EPS indicates growth of 3.1% and 2.2%, respectively, from the previous year’s reported levels.

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