Investopedia: Can RPM Play Catch Up On The Housing Trade?

2012 was a pretty good year for investors prescient (or aggressive) enough to get in early to housing-sensitive names such as Louisiana-Pacific (NYSE:LPX), Mohawk (NYSE:MHK) and Valspar (NYSE:VAL). While housing hasn't really recovered just yet, investors seem happy enough with signs of a real bottom and the improving sales at the home improvement warehouse chains. Curiously, however, despite a meaningful exposure to these markets RPM International (NYSE:RPM) hasn't shared in all of the enthusiasm. Now the question is whether it should, and whether that catch-up trade can fuel further gains in the shares.

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Investopedia: Armstrong's Ready For The Rebound, But How Much Longer Will It Take?

If you believe that corporate managers should only be judged by the variables they can control, Armstrong Worldwide (NYSE:AWI) has done quite well. While the declines in the residential and commercial building and remodeling markets have hamstrung sales growth, the company's expense structure has been slimmed down and the company maintains strong share in many of its markets. The question now, however, is whether or not the market has already factored in a significant recovery ahead of real improvements in building and remodeling activity.

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Investopedia: Buy Lowe's For Tomorrow, Not Today

Investors have a very clear choice in the home improvement/big-box home retailer sector. Home Depot (NYSE:HD) is posting solid growth, gaining share and raising guidance, while rival Lowe's (NYSE:LOW) is struggling amidst a meaningful change in its merchandising and inventory management. While Home Depot is definitely hard to beat for near-term momentum, investors with more of a value inclination ought to take a closer look into what's going on at Lowe's.

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Investopedia: Home Depot Continues To Ride A Stop-Start Recovery

Investors seem to be pretty committed to the idea that a real recovery is underway in America's housing market. While earnings reports from companies like Armstrong World Industries (NYSE:AWI), Mohawk (NYSE:MHK), Masco (NYSE:MAS) and Stanley Black & Decker (NYSE:SWK) did not support an unequivocal bull argument, the stocks recovered pretty quickly.

What's more, leading home improvement retailer Home Depot (NYSE:HD) continues to report rebounding sales in a wide range of housing-related product categories. Although Home Depot shares seem ahead of themselves on valuation alone, momentum will likely stay with the stock until the beat-and-raise pattern is broken.

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Seeking Alpha: Can Stanley Black & Decker Shake Off This Sluggishness?

Given that Stanley Black & Decker (NYSE: SWK) isn't quite as exposed to a U.S. housing recovery as commonly believed, it isn't the uncertain pace there that is keeping growth down. Rather, Stanley Black & Decker is seeing broad-based sluggishness across almost all of its businesses. While further diversification into industrial fasteners makes some long-term sense and the stock's valuation is not demanding, investors will have to have some patience to see this one work out.

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Can Stanley Black & Decker Shake Off This Sluggishness?

Investopedia: Louisiana-Pacific Still Bleeding

With a headline on a major internet news site proclaiming Tuesday morning that 30% of all mortgages in the U.S. are underwater, the problem for Louisiana-Pacific (NYSE:LPX) is pretty obvious. True, building and remodeling activity has not ceased entirely, but there's a lot of bubble-built capacity out there, and not nearly enough activity to let a leading building materials company like Louisiana-Pacific profit. It's not hard to build a model that suggests LPX is significantly undervalued, but with so much of the recovery baked into those years far ahead, the uncertainty is sky-high.

Some Good, Some Bad In the Third Quarter  
To be sure, it's not as though activity has ground to a halt. LPX actually reported 9% sales growth for the quarter, with basically flat results in Oriented Strand Board (OSB), 7% growth in siding and 44% growth in engineered wood products. For the most part, a familiar theme still rings true - volume growth is there, but pricing is weak.

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Investopedia: UFPI Tries To Wait Out The Storm

In the food chain of building products, Universal Forest Products (Nasdaq:UFPI) is stuck in an uncomfortable middle. UFPI doesn't grow trees, so it doesn't have the luxury shared by Plum Creek (NYSE:PCL) or Rayonier (NYSE:RYN) of just trimming back harvests and waiting for the bad times to pass. As a value-added producer of wood products, it also cannot do much to drive demand - if Pulte (NYSE:PHM) isn't building homes and if remodelers aren't heading to Home Depot (NYSE:HD) to get supplies for remodeling projects, there's almost nothing the company can do about it.


Consequently, while UFPI appears in many respects to be a well-run company, it is in pretty rough shape these days. A recovery in the core markets is an eventual inevitability but can the company and its shareholders hold on long enough to reap the benefits?

Another Tough Quarter
UFPI has been on an unfortunate run of late, and the third quarter isn't any different. Revenue was basically in line with analyst expectations, but still down more than 2%. On the margin side, the picture is more mixed: the company did better than might be expected given the market conditions, but the company still missed the bottom line estimate.


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Investopedia: Signs Of Dry Rot In The Building Market

It is easy to get confused and frustrated trying to figure out the housing and homebuilding market these days. A company like Toll Brothers (NYSE:TOL) can seem to be doing a little better, only to see news a few weeks later about dour housing starts or hear disappointing news from Lender Processing Services (NYSE:LPS) about the state of foreclosures. 

Adding fuel to the fire is Friday's news from Universal Forest Products (Nasdaq:UFPI) that their traditional peak selling season was disappointing and the lumber market is in tough shape. While bad news at UFPI does not guarantee bad news for Pulte (NYSE:PHM), Lowe's (NYSE:LOW), USG (NYSE:USG) or American Woodmark (Nasdaq:AMWD), it does offer up evidence that the long-hoped for recovery is still waiting to bloom.

When a Peak Becomes a Valley
The period from March to May is supposed to be some of the strongest months in the year for Universal Forest Products, a producer of lumber and various building products. Unfortunately, the company announced last Friday that year-to-date sales were down 9.5% through May, retail sales were down 15% and the lumber market declined for 11 straight weeks during what should have been a strong selling period.


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Investopedia: Toll Brothers Shows Not All Housing Is Terrible

The housing news cycle is still focused on the negative. The dominant stories from day to day still tend to revolve around the large volumes of bank-owned properties, the ongoing issues with the foreclosure process, and more and more stories of the malfeasance of banks, mortgage brokers, realtors and borrowers.

Wise investors know better than to just read the headlines without looking a little deeper. To that end, looking at the recent earnings report from Toll Brothers (NYSE:TOL) suggests that the higher-end housing market is doing OK and seems on track for recovery. That's not such good news for builders like Hovnanian (NYSE:HOV), Lennar (NYSE:LEN) or D.R. Horton (NYSE:DHI), but a recovery somewhere is better than bad news everywhere.

Underlying Second Quarter Results Seem a Little Better 

To be clear, it was not as though the Toll Brothers earnings report was uniformly fantastic. Revenue came in as expected with growth of 3%, but bottom-line earnings were worse than expected due in part to higher impairment charges. While the company did see solid improvement in gross margin (excluding impairments), SG&A was a little higher.

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