Stocks to Benefit from Housing Recovery: Analyst


Lennar’sbetter-than-expected earnings on Tuesday has reinforced one analyst’s positive view of the housing market's recovery. In a CNBC interview, he detailed a few stocks that could rise alongside the climbing housing market.

The company’s revenue topped Wall Street’s estimates to rise 30 percent to $724.9 million while its new orders rose 33 percent to 3,022 homes — its strongest first-quarter sales since 2008.

“So this is reinforcing our constructive view on the housing market,” said Robert Wetenhall, a RBC Capital Markets homebuilder analyst. “We think the read-through from Lennar , which is an excellent company with terrific management, is also applicable to the broader builders.”

Wetenhall has a $29 price target on the company. He said the housing sector should a good place for long-term investors as it begins to exhibit signs of healing.

“Overall, we’re definitely constructive on the sector for long-term investors with a two- to five-year time horizon," he said. "If you’re playing for a near-term gain, your upside could be limited, but if you have a longer investment horizon, you have to take a hard look at the group.”

Wetenhall is bullish on the housing market despite KB Home’s dismal quarterly earnings report last week.

“I think the issues that are affecting KB are definitely company-specific,” he said. “I think Lennar’s results today attest to a nascent recovery in the housing market.”

Wetenhall added that he did not think a possible rise in mortgage rates would derail the housing recovery.

“There’s an incredibly high level of affordability in the housing market so we don’t see the higher rates as an impediment to a recovery in the housing market at this juncture,” he said.

He listed several other stocks that could benefit from a housing market improvement.

“There a number of different ways to express the more constructive way on the housing market,” he said. “Armstrong’s one way to play it. You could also play that through Owens Corning or even USG .”

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RBC Capital Markets makes a market in the securities of Lennar and may act as principal with regard to sales or purchases of this security.



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