Shares of homebuilder stocks were trading higher on Tuesday after Pulte Homes reaffirmed its fourth-quarter outlook late Monday.
Separately, Soleil Securities Group began coverage of several homebuilder stocks with a cautious industry outlook, as an inventory glut and weak demand continue to bog down the sector.
Pulte Homes was among the stocks included in Soleil's research. Analyst Anna E. Toma started Pulte at "hold" with an $11 price target.
Pulte has a national presence and serves a variety of buyers, but its concentration in certain markets may result in a more sluggish recovery, Toma said.
In October, Pulte estimated earnings excluding items in a range of breakeven to 10 cents a share.
"While demand for new housing is weak and supply levels continue to be elevated, we remain committed to our previous guidance for fourth quarter pre-impairment earnings and cash position, and we continue to improve our already strong balance sheet," said Chief Executive Richard Dugas, Jr. in a statement. "Our teams continue to do an outstanding job selling and closing standing inventory and lowering overall land investment levels, all in an effort to generate cash and give Pulte maximum flexibility entering 2008."
Separately, Torma began coverage ofKB Homeat "hold" with a $25 price target, saying it's too early to buy the stock, especially if the economy deteriorates further. Still, the analyst said the company is well-positioned to withstand further weakness in the housing market because of its strong balance sheet and low land supply.
D.R. Hortongot a "hold" and $13 price target from Torma, who said the company is in a difficult spot, given its high land position, despite its broad geographic reach and efforts to control costs.
But she said some companies may be able to withstand a sluggish market better, which she expects to stabilize by late 2008.
Torma startedLennarat "buy" and said the stock has room to rise if the housing market starts to recover by the end of 2008.
"We believe that Lennar, because of its sufficient liquidity and strong balance sheet, is well-positioned to weather the storm in the event of a further downturn," wrote Torma, who has a $20 price target on the stock.
Centexalso received a "Buy" rating, as Torma said she expected the company to benefit from regional diversity and a proactive strategy.
And Toll Brothers was tagged with a "Buy" rating, as well, given its focus on the luxury market and strong balance sheet.
Reuters contributed to this report.