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On Monday, Raymond (NSE:RYMD) James maintained its Outperform rating on Taylor Morrison Home Corporation (NYSE:TMHC) but reduced the price target from the previous $74.00 to $65.00. The adjustment reflects changes in the economic landscape since early April. Taylor Morrison has managed to outperform its sector peers year-to-date, with a performance that is 600 basis points higher despite broader market challenges. According to InvestingPro data, the company currently trades at an attractive P/E ratio of 6.48x and appears undervalued based on its Fair Value analysis.
The analyst at Raymond James acknowledged the company’s robust performance amidst macroeconomic turbulence, citing Taylor Morrison’s diverse customer demographics, balanced geographic presence, and premium community locations as key factors contributing to its resilience. The firm’s analysis suggests that Taylor Morrison is positioned to sustain its outperformance, even with revised estimates that are now the lowest on the Street. InvestingPro analysis reinforces this view, with the company maintaining a "GOOD" Financial Health Score of 3.0 out of 4.0, supported by strong liquidity metrics including a robust current ratio of 7.72.
Despite the downward revision in price target and estimates, Raymond James forecasts a 13% return on equity for Taylor Morrison, with above-average margins and the potential for approximately $350 million in share repurchases throughout the year. These financial projections are supported by the company’s strong balance sheet and liquidity, which Raymond James believes should align Taylor Morrison’s valuation more closely with that of its larger-cap peers, rather than the current approximate 25% discount on forward-looking price-to-earnings for fiscal year 2025. InvestingPro data shows the company’s actual return on equity stands at 16%, with revenue reaching $8.36 billion in the last twelve months. Get access to 10+ additional ProTips and comprehensive analysis in the Pro Research Report.
However, the analyst also cautioned that recent fluctuations in mortgage rates and consumer confidence could exert additional pressure on pricing through the end of the year. Consequently, the firm anticipates that both fiscal year 2025 deliveries and margins will be at the lower end of Taylor Morrison’s revised guidance. Despite these challenges, there is optimism surrounding the continued visibility of pent-up buyer demand, as evidenced by ongoing customer traffic and engagement. This suggests that many of Taylor Morrison’s move-up and active-adult buyers may simply be pausing before advancing their lifestyle choices.
Considering the current trading value of Taylor Morrison shares at 1.1 times book value and less than 7 times the revised earnings per share projections for fiscal year 2026, Raymond James views the risk/reward profile as compelling. The firm holds that substantial earnings potential remains should mortgage rates decrease, offering a favorable outlook for Taylor Morrison despite the prevailing macroeconomic uncertainties. This analysis aligns with InvestingPro’s Fair Value assessment, which indicates significant upside potential from current levels.
In other recent news, Taylor Morrison Home Corp reported first-quarter 2025 earnings that exceeded expectations, with an adjusted earnings per share (EPS) of $2.18, surpassing analyst forecasts of $1.89. The company’s revenue reached $1.8 billion, slightly above the anticipated $1.78 billion. This performance marked a 25% year-over-year increase in adjusted EPS and a 12% increase in home closings revenue. Following the announcement, BTIG analysts raised their price target for Taylor Morrison to $79.00 from $75.00, maintaining a Buy rating on the shares. BTIG’s analysis highlighted the company’s strong performance, noting improvements in volume, pricing, and gross margins, despite a 9% year-over-year decline in new order volume. Taylor Morrison anticipates some margin pressure in the second quarter due to efforts to move speculative inventory, but its full-year guidance still exceeded BTIG’s projections. The company is targeting 13,000 to 13,500 home deliveries in 2025, with a share repurchase target of approximately $350 million for the year. Taylor Morrison’s strategic initiatives, including a shift towards higher-margin resort lifestyle communities and intensified share repurchase efforts, are expected to continue supporting its financial performance.
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