Housing Market Stocks Power Into 2013

The traditional “Santa Claus rally” barely registered an economic blip in December 2012 as all the attention was on the looming fiscal cliff. As Residential Building Product News’ trading session ended Jan. 31, 2013, the Dow industrials finished with their best first-of-year in almost two decades, and the S&P 500 logged its best month since October 2011.

December began with a better-than-expected jobs report for November, with 146,000 jobs added. However, manufacturing showed a sharp and unexpected decline. Stocks faltered as December wore on and prospects for a deal on taxes dimmed. One of the bright spots in the month was home sales, which rose to their best level in three years. Sales of previously occupied homes inched toward a five-year high, according to the National Association of Realtors. The National Association of Home Builders and Wells Fargo released a survey on builder confidence that reflected an increase for the seventh straight month and hit the highest level in 6.5 years.

As January began, earnings season showed more durability than analysts expected, with jobs and housing shoring up cracks in earnings and outlook. Consumer sentiment unexpectedly slumped as they chewed on the fiscal cliff debates and concern about debt limits and spending cuts.

Housing starts rose in December to the highest level since 2008, and December was also good for retail stocks. As our month eased to a close, the S&P 500 Index flirted, topped, then closed above 1,500 for the first time since 2007. “Granted, we have diminished expectations, but companies are doing a decent job on the profit side,” said Jack Ablin, chief investment officer at Chicago’s BMO Private Bank. Albin said the economy is not out of the woods, and pointed to hopes for emerging markets and Europe. “The United States has been pulling this wagon by itself for the last couple years, and now we’re facing austerity measures.”

The Residential Building Product News Stock Index rose in sturdy tandem with the national markets, growing by 90.14 points, or 6.49 percent, to close at 1479.17. Advancing issues dominated declining issues by a 41-to-4 count.

Sherwin-Williams jumped 9.62 points, or 6.31 percent after posting sharply higher fourth quarter results. SHW said it earned net income of $117.2 million, or $1.12 per share, compared to net income of $14.6 million or $0.14 per share one year ago. Analysts polled by FactSet expected Sherwin-Williams to earn $1.15 per share with sales of $2.19 billion. The company said its first quarter results in 2013 should range between $1.03 and $1.13 per share. Analysts estimate earnings of $1.09 per share, on average. Wall Street forecasts profit of $7.93 for all of 2013; SHW expects earning between $7.45 and $7.55 per share. SHW closed the session at 162.14.

Shares of American Woodmark slipped 0.60 points, or 13.64 percent despite a strong ranking by Zacks. The research firm gave American Woodmark its No. 1 rank (strong buy), citing past performance, including topping estimates by more than 50 percent over the past eight quarters. Zacks also remarked on the company’s reboundfrom earlier losses and a growth in sales of more than 40 percent. AMWD closed at 27.81 and was the top dollar loser.

Whirlpool notched another robust session following its stellar performance last session as our top dollar gainer. WHR added 13.54 points, or 13.30 percent after beating analysts’ estimates for the fourth quarter. Whirlpool posted net income of $122 million, or $1.52 per share, versus net income of $2.05 million, or $2.62 per share a year ago. Excluding special items, which are not taken into account in analysts’ estimates, WHR earned $2.29 per share, compared to the $2.23 average from analysts surveyed by Thomson Reuters. Sales were off 2.4 percent, to $4.79 billion. Whirlpool cited cost-cutting and a tight rein on spending, and said the company expects growth in 2013.


About the Author

Margot Crabtree is President of Trade Trends Inc., a financial data services provider. She has been offering market analysis with customized stock indices and financial commentaries since 1999.