Taylor Morrison Home Corporation: Despite Weaknesses, Picture For The Business Is Bullish

Core Viewpoint - Taylor Morrison Home Corporation has shown significant stock performance despite mediocre financial results, indicating potential undervaluation and future growth opportunities [1][17]. Financial Performance - Revenue for the second quarter of 2024 was $1.99 billion, a decrease of 3.4% from $2.06 billion in the same quarter last year [2]. - Net income fell from $234.6 million in Q2 2023 to $199.5 million in Q2 2024, driven by both sales declines and price changes impacting margins [4]. - Operating cash flow turned negative at -$233.4 million, down from $259.7 million year-over-year [4]. Home Closings and Pricing - Total home closings in Q2 2024 were 3,200, up from 3,125 in Q2 2023, but the average closing price dropped from $639,000 to $600,000 due to high interest rates [3]. - For the first half of 2024, home closings increased from 5,666 to 5,931, yet the average price of homes closed decreased from $637,000 to $600,000 [5]. Backlog and Orders - The backlog increased to 6,256 homes from 6,156 homes year-over-year, with the average price in backlog rising from $664,000 to $671,000 [6]. - Net new orders for the most recent quarter were 3,111 homes, up from 3,023 homes the previous year, with a year-to-date total of 6,797 homes ordered compared to 5,877 last year [8]. Cancellation Rates - The cancellation rate improved to 9.4% in the most recent quarter, down from 11.2% a year earlier, indicating a positive trend in buyer commitment [10]. Future Outlook - Management expects between 12,600 and 12,800 home closings for 2024, with average prices projected between $600,000 and $610,000, suggesting stable pricing in the near term [12]. - Anticipated interest rate cuts by the Federal Reserve could enhance housing demand, as the country faces a housing shortage estimated at 4.5 million units [16]. Valuation Metrics - Taylor Morrison Home Corporation is currently valued attractively compared to peers, with a price-to-earnings ratio of 10.0, the lowest among comparable companies [15][16].