Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Beazer Homes (NYSE:BZH) are up over 10% today in spite of a mixed earnings report, as investors seem more interested in big revenue growth than in steep losses at the moment.
So what: Beazer reported revenue of $287.9 million, which was a 50% year-over-year improvement, but posted a loss of $0.78 per share. The top-line number came in well ahead of Wall Street's expectation of $254.3 million, but Beazer's loss was $0.08 worse than the $0.70 loss per share analysts sought. More optimistically, Beazer now expects to turn a profit in the fourth quarter, which was "an unexpected positive catalyst" according to Jay McCanless of Sterne Agee. McCanless raised his price target to $22 per share, a 19% upside from today's close. The note of a substantially higher backlog in that profit forecast also cheered the market.
Now what: Beazer is inching toward profitability, but it isn't there yet. Consider that it will take $0.62 in earnings per share to give Beazer a P/E of 30, once it reaches McCanless' price target. That would be a major turnaround from today's report, but who knows -- it might be possible next year. This could be a catalyst for the stock to break out of its flat trading range, but it's worth investigating whether or not such a move would be justified over the long term.
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