Dj Pultegroup Inc. Stock Underperforms Wednesday When Compared To Competitors

Designed to provide broad exposure to the Style Box - Mid Cap Blend category of the market, the Franklin U.S. Mid Cap Multifactor Index ETF (FLQM) is a smart beta exchange traded fund launched on 04/26/2017.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is sponsored by Franklin Templeton Investments. It has amassed assets over $1.15 billion, making it one of the average sized ETFs in the Style Box - Mid Cap Blend. FLQM, before fees and expenses, seeks to match the performance of the LibertyQ U.S. Mid Cap Equity Index.

The LibertyQ U.S. Mid Cap Equity Index includes U.S. mid-capitalization companies that have favorable exposure to four investment style factors - quality, value, momentum and low volatility.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.30%.

The fund has a 12-month trailing dividend yield of 1.23%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

FLQM's heaviest allocation is in the Industrials sector, which is about 24.40% of the portfolio. Its Consumer Discretionary and Information Technology round out the top three.

Taking into account individual holdings, Fair Isaac Corp (FICO) accounts for about 1.39% of the fund's total assets, followed by Dr Horton Inc (DHI) and Pultegroup Inc (PHM).

The top 10 holdings account for about 11.3% of total assets under management.

Performance and Risk

So far this year, FLQM return is roughly 20.42%, and is up about 35.61% in the last one year (as of 11/13/2024). During this past 52-week period, the fund has traded between $43.94 and $57.97.

The ETF has a beta of 1.02 and standard deviation of 17.22% for the trailing three-year period. With about 207 holdings, it effectively diversifies company-specific risk.

Alternatives

Franklin U.S. Mid Cap Multifactor Index ETF is a reasonable option for investors seeking to outperform the Style Box - Mid Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Mid-Cap ETF (VO) tracks CRSP US Mid Cap Index and the iShares Core S&P Mid-Cap ETF (IJH) tracks S&P MidCap 400 Index. Vanguard Mid-Cap ETF has $74.20 billion in assets, iShares Core S&P Mid-Cap ETF has $97.61 billion. VO has an expense ratio of 0.04% and IJH charges 0.05%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Mid Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

The S&P 500 Index Tuesday closed down -0.29%, the Dow Jones Industrials Index closed down -0.86%, and the Nasdaq 100 Index closed down -0.17%.

Stock indexes settled moderately lower on Tuesday as they consolidated the past week’s rally to record highs. Higher bond yields Tuesday fueled some profit-taking pressures in stocks following five straight sessions of gains. Also, long liquidation in stocks ahead of Wednesday's US consumer price report weighed on the overall market.

Stocks have rallied sharply over the past week, with the S&P 500, Dow Jones Industrials, and the Nasdaq 100 posting new record highs on speculation President-elect Trump will boost corporate profits through tax cuts and reduced regulation.

Positive Fed comments on Tuesday were bullish for stocks. Richmond Fed President Barkin said the US economy looks "pretty good," and the Fed is in a position to respond however the economy evolves. Also, Minneapolis Fed President Kashkari said only inflation could derail a Fed rate cut in December, and "if we saw inflation surprises to the upside between now and then, that might give us pause."

The markets are looking ahead to Wednesday’s US consumer price report for October, with Oct CPI expected to climb to +2.6% y/y, up from +2.4% y/y in Sep, and core Oct CPI expected to remain unchanged from Sep at +3.3% y/y. Also, Friday’s report on retail sales will be looked at to see if consumer spending is holding up. Oct retail sales are expected to be up +0.3% m/m, and Oct retail sales ex-autos are also expected to be up +0.3% m/m.

Of the 85% of companies in the S&P 500 that have released Q3 earnings so far, 75% surpassed the estimates, slightly below the 3-year average. According to Bloomberg Intelligence, companies in the S&P 500 have reported an average +8.4% y/y increase in quarterly earnings in Q3, more than double the preseason forecast.

The markets are discounting the chances at 62% for a -25 bp rate cut at the December 17-18 FOMC meeting.

Overseas stock markets Tuesday settled lower. The Euro Stoxx 50 tumbled to a 2-month low and closed down -2.25%. China's Shanghai Composite Index closed down -1.39%. Japan's Nikkei Stock 225 closed down -0.40%.

Interest Rates

December 10-year T-notes (ZNZ24) Tuesday closed down by -15.5 ticks. The 10-year T-note yield rose +13.1 bp to 4.435%. T-notes were under pressure Tuesday from carryover weakness in European government bonds. Also, upbeat comments Tuesday from Richmond Fed President Barkin curbed safe-haven demand for T-notes when he said the US economy looks "pretty good." In addition, concerns about inflationary pressures of future policies from President-elect Trump are weighing on T-notes.

European government bond yields Tuesday moved higher. The 10-year German bund yield rebounded from a 1-1/2 week low of 2.299% and finished up +3.6 bp to 2.362%. The 10-year UK gilt yield rose +7.4 bp to 4.499%.

The German Nov ZEW survey expectations of economic growth unexpectedly fell -3.7 to 7.4 versus expectations of an increase to 13.2.

ECB Governing Council member Rehn said disinflation in the Eurozone is "well on track," and the growth outlook "seems to be weakening," and "that strengthens the case for an ECB rate cut in December."

Swaps are discounting the chances at 100% for a -25 bp rate cut by the ECB at its December 12 policy meeting and at 23% for a -50 bp rate cut at the same meeting.

US Stock Movers

Mosaic closed down more than -7% to lead losers in the S&P 500 after reporting Q3 net sales of $2.8 billion, weaker than the consensus of $3.14 billion.

GE Vernova closed down more than -7% after the Financial Times reported that CEO Strazik said the company plans to postpone searching for new offshore turbine orders until market conditions improve.

Home builders retreated Tuesday after the 10-year T-note yield jumped more than +13 bp, which boosts mortgage rates and is negative for housing demand. As a result, PulteGroup , Lennar , DR Horton , and Toll Brothers closed down more than -3%.

Elevance Health closed down more than -2% after the CFO said he sees pressure in Medicaid persisting in 2025 and sees Medicare Advantage margins missing their 2025 targets.

Neurogene closed down more than -43% after a disclosure indicated an emerging serious adverse event in a trial participant for the experimental Rett syndrome drug.

Alnylam Pharmaceuticals closed down more than -3% after Wolfe Research downgraded the stock to underperform from peer perform with a price target of $205.

Knight-Swift Transportation Holdings closed down more than -4% after Citigroup downgraded the stock to sell from neutral with a price target of $56.

Airbnb closed down more than -2% after Phillip Securities downgraded the stock to reduce from neutral with a price target of $120.

Tyson Foods closed up more than +6% to lead gainers in the S&P 500 after reporting Q4 adjusted EPS of 92 cents, stronger than the consensus of 72 cents.

Honeywell International closed up more than +3% to lead gainers in the Dow Jones Industrials and Nasdaq 100 after Elliot Investment Management said it built a $5 billion stake in the company and is calling for a breakup of the company.

Live Nation Entertainment closed up more than +4% after reporting Q3 adjusted operating income of $909.8 million, stronger than the consensus of $856.6 million.

Nvidia closed up more than +2% after Redburn initiated coverage on the stock with a buy recommendation and a price target of $178.

Shopify closed up more than +21% after reporting Q3 revenue of $2.16 billion, better than the consensus of $2.12 billion.

Twilio closed up more than +2% after Wells Fargo Securities upgraded the stock to overweight from equal weight with a price target of $120.

Molson Coors Beverage closed up more than +2% after JPMorgan Chase said the latest data showed improving trends for the company as the latest 4-week trend to November 2 saw dollar takeaway down -1.9%, an improvement of 200 bp over the prior 4-week period.

Earnings Reports (11/13/2024)

Cisco Systems Inc (CSCO), Loar Holdings Inc (LOAR), NU Holdings Ltd/Cayman Islands (NU), Tetra Tech Inc (TTEK).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

It doesn't matter your age or experience: taking full advantage of the stock market and investing with confidence are common goals for all investors. Luckily, Zacks Premium offers several different ways to do both.

Featuring daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, the research service can help you become a smarter, more self-assured investor.

Zacks Premium also includes the Zacks Style Scores.

What are the Zacks Style Scores?

The Zacks Style Scores, developed alongside the Zacks Rank, are complementary indicators that rate stocks based on three widely-followed investing methodologies; they also help investors pick stocks with the best chances of beating the market over the next 30 days.

Each stock is assigned a rating of A, B, C, D, or F based on their value, growth, and momentum characteristics. Just like in school, an A is better than a B, a B is better than a C, and so on -- that means the better the score, the better chance the stock will outperform.

The Style Scores are broken down into four categories:

Value Score

For value investors, it's all about finding good stocks at good prices, and discovering which companies are trading under their true value before the broader market catches on. The Value Style Score utilizes ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and a host of other multiples to help pick out the most attractive and discounted stocks.

Growth Score

Growth investors are more concerned with a stock's future prospects, and the overall financial health and strength of a company. Thus, the Growth Style Score analyzes characteristics like projected and historic earnings, sales, and cash flow to find stocks that will see sustainable growth over time.

Momentum Score

Momentum traders and investors live by the saying "the trend is your friend." This investing style is all about taking advantage of upward or downward trends in a stock's price or earnings outlook. Employing factors like one-week price change and the monthly percentage change in earnings estimates, the Momentum Style Score can indicate favorable times to build a position in high-momentum stocks.

VGM Score

If you like to use all three kinds of investing, then the VGM Score is for you. It's a combination of all Style Scores, and is an important indicator to use with the Zacks Rank. The VGM Score rates each stock on their shared weighted styles, narrowing down the companies with the most attractive value, best growth forecast, and most promising momentum.

How Style Scores Work with the Zacks Rank

A proprietary stock-rating model, the Zacks Rank utilizes the power of earnings estimate revisions, or changes to a company's earnings outlook, to help investors create a successful portfolio.

It's highly successful, with #1 (Strong Buy) stocks producing an unmatched +25.41% average annual return since 1988. That's more than double the S&P 500. But because of the large number of stocks we rate, there are over 200 companies with a Strong Buy rank, plus another 600 with a #2 (Buy) rank, on any given day.

With more than 800 top-rated stocks to choose from, it can certainly feel overwhelming to pick the ones that are right for you and your investing journey.

That's where the Style Scores come in.

To have the best chance of big returns, you'll want to always consider stocks with a Zacks Rank #1 or #2 that also have Style Scores of A or B, which will give you the highest probability of success. If you're looking at stocks with a #3 (Hold) rank, it's important they have Scores of A or B as well to ensure as much upside potential as possible.

As mentioned above, the Scores are designed to work with the Zacks Rank, so any change to a company's earnings outlook should be a deciding factor when picking which stocks to buy.

Here's an example: a stock with a #4 (Sell) or #5 (Strong Sell) rating, even one with Style Scores of A and B, still has a downward-trending earnings outlook, and a bigger chance its share price will decrease too.

Thus, the more stocks you own with a #1 or #2 Rank and Scores of A or B, the better.

Stock to Watch: PulteGroup (PHM)

Based in Atlanta, GA, PulteGroup Inc. engages in homebuilding and financial services businesses, primarily in the United States. The company conducts operations through two primary business segments – Homebuilding (which contributed 98% as of 2023 to total revenues) and Financial Services (2%).

PHM is a #3 (Hold) on the Zacks Rank, with a VGM Score of A.

It also boasts a Value Style Score of B thanks to attractive valuation metrics like a forward P/E ratio of 9.94; value investors should take notice.

Five analysts revised their earnings estimate higher in the last 60 days for fiscal 2024, while the Zacks Consensus Estimate has increased $0.06 to $13.42 per share. PHM also boasts an average earnings surprise of 10.9%.

With a solid Zacks Rank and top-tier Value and VGM Style Scores, PHM should be on investors' short list.

Zacks Investment Research

Beazer Homes USA, Inc. BZH is scheduled to report fourth-quarter fiscal 2024 (ended Sept. 30, 2024) results on Nov. 13, after the closing bell.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

In the last reported quarter, Beazer Homes’ earnings per share (EPS) beat the Zacks Consensus Estimate by 4.8% but revenues missed the same by 0.6%. On a year-over-year basis, EPS of 88 cents declined from the year-ago level of $1.42. Revenues of $595.7 million increased 4% year over year. Homebuilding revenues were $589.6 million, marking a 3.3% increase, driven by a 4.5% rise in home closings to 1,167 units, though offset by a 1.1% decline in average selling price (ASP) to $505,300.

Beazer Homes, one of the country’s largest homebuilders, surpassed the consensus mark in three of the last four quarters. The average surprise over this period is 17.8%.

How Are Estimates Placed for BZH Stock?

The Zacks Consensus Estimate for the fiscal fourth-quarter EPS has remained unchanged at $1.36 over the past 60 days. The estimated figure indicates a 24.4% decline from the year-ago reported figure. Nonetheless, the consensus mark for revenues is $774.3 million, indicating 20% year-over-year growth.

Beazer Homes USA, Inc. Price and EPS Surprise

Beazer Homes USA, Inc. price-eps-surprise | Beazer Homes USA, Inc. Quote

Factors Influencing Beazer Homes’ Q4 Performance

Beazer Homes’ total revenues in the fiscal fourth quarter might have registered growth mainly attributable to higher deliveries. Although elevated mortgage rates continued to weigh on affordability for potential buyers, the company’s proactive strategies in expanding its community count, embracing sustainable building practices, and making calculated financial decisions might have driven growth. The company’s unique positioning with energy-efficient homes, combined with its robust financial health are added positives.

The company expects closings in the fiscal fourth quarter to be around 1,500 homes, marking more than 20% increase compared to the previous year. The ASP is projected to be approximately $520,000, reflecting a modest uptick from the year-ago level of $510,800.

The fiscal fourth-quarter sales pace is expected to align with the fiscal third quarter, leading to approximately 1,100 new orders, slightly up from the prior year.

However, to address the affordability challenges faced by many buyers, Beazer Homes increased sales incentives, which had a direct impact on gross margins. Also, Beazer Homes is focused on selling non-"Zero Energy Ready" spec homes in certain markets. This approach, while helping to clear older inventory, comes at the cost of gross margin as these homes are sold with higher incentives and typically at lower margins than newer energy-efficient homes. Also, inflationary pressures in construction materials and labor are expected to have further compressed operating profitability.

The company expects adjusted gross margin to remain stable at around 20%, similar to the prior quarter, with SG&A expenses anticipated to be about 10% of total revenues, down both sequentially and year over year. This is expected to lead to an adjusted EBITDA exceeding $80 million, contributing to projected EPS of around $1.35.

What the Zacks Model Unveils for Beazer Homes

Our proven model does not predict an earnings beat for Beazer Homes for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: BZH has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

D.R. Horton, Inc. DHI reported fourth-quarter fiscal 2024 (ended Sept. 30, 2024) results, with earnings and revenues missing Zacks Consensus Estimate and decreasing on a year-over-year basis.

D.R. Horton’s quarterly performance fell short of expectations primarily due to a combination of high mortgage rates and buyer hesitancy.

PulteGroup Inc. PHM reported impressive results in the third quarter of 2024, wherein earnings and total revenues handily beat the Zacks Consensus Estimate and grew year over year.

PHM’s result reflects the successful execution of the company’s balanced spec and build-to-order operating model. This, alongside the structural shortage of homes from years of underbuilding, continued to favor the company. Thanks to such tailwinds, the home closings during the quarter grew year over year, resulting in record third-quarter home sale revenues.

NVR, Inc. NVR reported mixed third-quarter 2024 results, with earnings missing the Zacks Consensus Estimate and Homebuilding revenues surpassing the same. On the other hand, both metrics increased on a year-over-year basis.

This upside was backed by improved demand trends, which resulted in higher settlements. Although the cancelation rate increased in the quarter, growth in new orders is encouraging for the company.

Zacks Investment Research