Afternoon Note
The market rally has been tenuous, which isn’t a surprise considering all the financial results that had to be digested today. Even “good” news must be parsed, and it’s not uncommon to see the street change its mind and winners become losers like Whirlpool (WHR). Note: that’s only for today’s session. It is critical for investors to comb through data to avoid the emotions of the crowd.
Bad News is Bad News
Existing homes are 90% of the housing market and once again the numbers were a disappointment. What makes the June report so heartbreaking is the 30-year fixed mortgage rate was 3.81%, down significantly from 4.94% in November. Also worrisome is declines were in most price points, especially homes under $100,000; which has gone into complete freefall across the entire country.
Year over year, single family homes grew 4.5%, while condos and coops edged up 2.8%.
Existing Single-Family Homes: Regional Sales by Price
June 2019
% Change in Sales from 1 Year Ago |
||||||
Region |
$0-100K |
$100-250K |
$250-500K |
$500-750K |
$750K-1M |
$1M+ |
Northeast |
-21.5% |
-13.1% |
-1.3% |
0.0% |
-5.4% |
-9.4% |
Midwest |
-18.3% |
-8.9% |
4.5% |
6.9% |
8.5% |
0.4% |
South |
-17.0% |
-7.2% |
3.6% |
0.8% |
2.4% |
1.1% |
West |
-31.3% |
-22.7% |
-3.5% |
-0.1% |
-4.8% |
-9.8% |
U.S. |
-18.7% |
-10.0% |
1.0% |
0.8% |
-2.4% |
-7.2% |
Sales Distribution |
||||||
Region |
$0-100K |
$100-250K |
$250-500K |
$500-750K |
$750K-1M |
$1M+ |
U.S. |
6.9% |
35.7% |
39.4% |
10.9% |
3.6% |
3.5% |
Months’ supply edged up slightly.
Month |
Months’ Supply |
May 2018 |
3.9 |
June 2018 |
4.0 |
June 2019 |
4.1 |
Tale of Two Trends
Which one of these trend is most alarming? Of course, one might say sales, but it’s hard to ignore the fact prices are getting out of reach for many would-be buyers. It was nice to see first time buyers climb to 35% of the total from 32%; 40% would be a very health housing market.
After the release of existing home sales, the equity market stalled and has struggled. I like when bad news is bad news. However, there has been really great earnings news, and it must be examined on a company by company basis.
Stock of the Day
Sherwin Williams is the stock of the day. The Cleveland Ohio based company posted earnings that blew away the street and the company gave better guidance. The results were driven by the ability of management to increase prices in all three business segments with little to no offset in volume.
From management
"All three of our segments increased profit and margin year-over-year. In The Americas Group, we generated sales growth in all end markets in our North American paint stores, led by high single digit growth in residential repaint. We leveraged the sales growth to expand segment margin by 50 basis points to 22.2%. We've opened 20 net new stores year to date, and our professional painting contractor customers continue to report solid backlogs and project pipelines going forward. In our Consumer Brands Group, our growth initiatives with our largest partners in North America are performing well and more than offset softer demand in some international markets. Adjusted segment margin improved 490 basis points to 20.3%, driven by sales growth and good cost control. Performance Coatings Group sales declined in the quarter mainly related to softer demand in some end markets in Asia and Europe. Despite the sales decline, adjusted segment margin increased 150 basis points to 15.5% - evidence of our good cost control and that our recent pricing actions are gaining traction to offset raw material inflation.
We are reaffirming our full year 2019 adjusted diluted net income per share guidance to be in the range of $20.40 to $21.40 per share, excluding acquisition-related costs and charges for non-operating expenses, compared to $18.53 per share for the full year 2018 on a comparable basis."
Message of Market
Sherwin Williams (SHW) is leading Materials higher. Meanwhile, Stanley Black and Decker (SWK) is leading Industrials higher. Lots of buyers looking for value are piling into these names. Big money center banks are doing well. Perhaps its value buyers, but regionals are lower on a big downgrade.
Tweet |
3/28/2024 1:39 PM | Fruitful Quarter |
3/28/2024 9:50 AM | LISTEN TO THE MARKET |
3/27/2024 1:40 PM | Mostly Higher |
3/27/2024 9:32 AM | U-TURN? |
3/26/2024 1:08 PM | Everything Is Up |
3/26/2024 9:42 AM | TAPPED OUT (I HOPE YOU AT LEAST GOT A T-SHIRT) |
3/25/2024 1:33 PM | Not A Mutiny |
3/25/2024 9:35 AM | STAYING THE COURSE…BEYOND TECH |
3/22/2024 12:56 PM | Toll on Americans |
3/22/2024 9:38 AM | A TAD TIRED |
3/21/2024 1:55 PM | Building on Gains |
3/21/2024 9:30 AM | A COMFORTING FED |
3/20/2024 1:33 PM | Pivotal Moment |
3/20/2024 10:00 AM | HERE COMES THE FED |
3/19/2024 1:33 PM | Picking Up Steam |
3/19/2024 9:35 AM | RUMBLINGS IN THE BOND MARKET |
3/18/2024 1:48 PM | Mag 7 is Back |
3/18/2024 9:39 AM | THE PARTY IN SAN JOSE WILL BE LIT |
3/15/2024 1:38 PM | Realtors Settle |
3/15/2024 9:33 AM | AN UNEASY PAUSE |
3/14/2024 1:43 PM | Sticky Inflation |
3/14/2024 9:48 AM | GOING TO A GO-GO |
3/13/2024 2:16 PM | Taking a Breather |
3/13/2024 9:51 AM | ALL SO EPIC |
3/12/2024 1:42 PM | Marching Higher |
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