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Sept. 21, 2018, 6:54 a.m. EDT

Home builders TRI Pointe, William Lyon downgraded on ‘rapid’ slowdowns in California, Seattle

Shares falls to pace home builder decliners after Wedbush cuts ratings to neutral

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By Tomi Kilgore, MarketWatch


Bloomberg News/Landov

Shares of home builders TRI Pointe Group and William Lyon Homes were took a dive Thursday, after Wedbush Securities analyst Jay McCanless cut his ratings, citing the “rapid” deceleration of demand in the companies’ key markets.

McCanless downgraded both stocks to neutral from outperform. He slashed his price target for TRI Pointe /zigman2/quotes/204302452/composite TPH +0.88% by 28% to $13 from $18, and for William Lyon /zigman2/quotes/208078919/composite WLH +0.81% by 37% to $22 from $35.

“The rapid deceleration in housing demand for California and Seattle...this summer requires a more conservative earnings outlook on our part,” McCanless wrote in a note to clients.

“Both markets have exhibited a rapid slowdown in unit sales and in home price appreciation,” he wrote. “We do not see a near-term positive catalyst to reverse either trend.”

Don’t miss : Mortgage rates jump to four-month high as housing starts to falter.

Also read : Home builder confidence stalls as tariffs bite.

He noted California and Seattle represented about half of Irvine, Calif.-based TRI Pointe’s community count, and are just under 50% of Newport Beach, Calif.-based William Lyon’s count.

/zigman2/quotes/203468436/composite ITB 45.77, +0.46, +1.02%

William Lyon’s stock dropped 7.8% to a 19-month closing low, while TRI Pointe shares shed 3.7% to close at a 12-month low. The stocks were the two biggest decliners, of the iShares U.S. Home Construction exchange-traded fund /zigman2/quotes/203468436/composite ITB +1.02% .

Among other more-active home builder stocks, PulteGroup Inc. /zigman2/quotes/201694804/composite PHM +1.09% lost 1.1%, KB Home /zigman2/quotes/206220859/composite KBH +2.14% shed 2.2%, Lennar Corp. /zigman2/quotes/202536373/composite LEN +1.00% dropped 1.3% and D.R. Horton Inc. /zigman2/quotes/202032328/composite DHI +1.41% slipped 0.2%.

Over the past three months, TRI Pointe shares have slid 20.6%, William Lyon’s stock has slumped 24.9% and the home construction ETF has slipped 3.5%, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.29% has gained 6.6%.

/zigman2/quotes/204302452/composite
US : U.S.: NYSE
$ 15.97
+0.14 +0.88%
Volume: 2.11M
Dec. 11, 2019 4:10p
P/E Ratio
12.05
Dividend Yield
N/A
Market Cap
$2.20 billion
Rev. per Employee
$2.27M
loading...
/zigman2/quotes/208078919/composite
US : U.S.: NYSE
$ 21.12
+0.17 +0.81%
Volume: 323,866
Dec. 11, 2019 4:10p
P/E Ratio
13.16
Dividend Yield
N/A
Market Cap
$792.88 million
Rev. per Employee
$2.40M
loading...
/zigman2/quotes/203468436/composite
US : U.S.: Cboe BZX
$ 45.77
+0.46 +1.02%
Volume: 1.54M
Dec. 11, 2019 4:10p
loading...
/zigman2/quotes/201694804/composite
US : U.S.: NYSE
$ 40.71
+0.44 +1.09%
Volume: 1.61M
Dec. 11, 2019 4:10p
P/E Ratio
12.41
Dividend Yield
1.18%
Market Cap
$10.91 billion
Rev. per Employee
$1.98M
loading...
/zigman2/quotes/206220859/composite
US : U.S.: NYSE
$ 35.73
+0.75 +2.14%
Volume: 1.09M
Dec. 11, 2019 4:10p
P/E Ratio
14.19
Dividend Yield
1.01%
Market Cap
$3.09 billion
Rev. per Employee
$2.37M
loading...
/zigman2/quotes/202536373/composite
US : U.S.: NYSE
$ 59.72
+0.59 +1.00%
Volume: 1.56M
Dec. 11, 2019 4:10p
P/E Ratio
9.88
Dividend Yield
0.27%
Market Cap
$18.78 billion
Rev. per Employee
$1.77M
loading...
/zigman2/quotes/202032328/composite
US : U.S.: NYSE
$ 55.91
+0.78 +1.41%
Volume: 2.37M
Dec. 11, 2019 4:10p
P/E Ratio
13.02
Dividend Yield
1.25%
Market Cap
$20.32 billion
Rev. per Employee
$1.93M
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,141.63
+9.11 +0.29%
Volume: 1.71B
Dec. 11, 2019 5:01p
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Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter @TomiKilgore.

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