Homebuilder Tri Pointe Homes is poised to break out of a base, after the company's profits soared more than 100% in the latest quarter. Tri Pointe Homes earns a spot on the IBD Breakout Stocks Index.
Homebuilder stocks have been strong for nearly two years, and while many are extended, others are still forming new bases, like Tri Pointe.
Tri Pointe focuses on single-family homes in California, Arizona, Nevada, Washington and Texas.
In the latest quarter, reported on July 25, the company posted better-than-expected second-quarter earnings and sales results. Profit jumped 108% to $1.25 per share on revenue of $1.14 billion, a year-over-year increase of 38%. The results extended a turnaround for Tri Pointe, whose earnings per share had declined for five straight quarters until a 41% increase in Q1, according to MarketSurge.
"We delivered 1,700 homes, resulting in home sales revenue of $1.1 billion, a 38% increase compared to the previous year," said CEO Doug Bauer in the press release. The strong revenue growth was fueled by a 45% increase in deliveries, which resulted in net income rising 94% to $118 million.
"As we continue to build scale across our markets, and due to the strong demand and pricing power we have experienced in recent quarters, our homebuilding gross margin percentage increased 320 basis points year-over-year to 23.6%," Bauer added.
Looking forward, analysts expect full-year earnings to rise 38%, per FactSet, before tacking on 4% in 2025.
Tri Pointe ranks No. 2 in the homebuilder industry and holds near-perfect 98 IBD Composite and EPS Ratings, per the IBD Stock Checkup.
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Tri Pointe Homes Nears Buy Point
Tri Pointe Homes is in a cup-with-handle base with a 46.56 buy point, according to IBD MarketSurge pattern recognition. Shares have found support at the 50-day moving average as the base develops.
A bullish factor is the stock's tight trading over the past three weeks. Tight trading in the handle is a positive attribute, indicating institutional support. The handle is just as long as the cup portion and almost as deep. Yet, the handle still has an acceptable 12% in depth.
Keep an eye on the stock's relative strength line. While it has perked up since mid-August, it remains off a 52-week high that was set in late July. The RS line should hit a new high on the breakout day or shortly thereafter to reiterate the stock as a market leader.
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