More Bad News for Builders With BofA Downgrades, RBC Gloom
- Toll Brothers, PulteGroup, NVR shares drop after ratings cut
- RBC worries about growth as prices are stretched in key places
Homebuilder stocks fell after Bank of America Merrill Lynch cut its recommendation to neutral from buy on three of the biggest companies -- Toll Brothers, PulteGroup and NVR -- and RBC offered fresh skepticism about growth and affordability. Toll Brothers is paring a decline of as much as 3.1 percent in early trading; PulteGroup is off by 2.5 percent, and NVR, which also reported disappointing third-quarter results, is down as much as 7.8 percent to the lowest intraday since April 2017.
BofA Merrill Lynch’s stock downgrades come as its U.S. economics team lowered forecasts for 2018-2019 housing starts and new home sales, analyst John Lovallo writes in a note. Lovallo says his call on NVR isn’t based on third-quarter results, but is instead due to likely below-peer order growth in 2019; he cuts Toll Brothers as the high-end of the market is moderating, and downgrades PulteGroup as it may try to drive gross margin by "pushing price over pace."