Options Trade – Beazer Homes USA, Inc. (NYSE:BZH) Calls
Monday, September 01, 2014

**OPTIONS TRADE: Buy the BZH Jan 2015 20.000 call (BZH150117C00020000) at or under $1.10, good for the day. Place a protective stop limit at $0.45 and a pre-determined sell at $2.00.

by Ian Harvey

September 01, 2014

Introduction

Beazer Homes USA, Inc. (NYSE: BZH), a home-building company, makes for an interesting options play, as it not only have decent short-term momentum, but is seeing solid activity on the earnings estimate revision front as well.

These positive earnings estimate revisions suggest that analysts are becoming more optimistic on BZH’s earnings for the coming quarter and year. In fact, consensus estimates have moved sharply higher for both of these time frames over the past four weeks, suggesting that Beazer Homes could be a solid choice for investors.

On top of this, Beazer Homes will benefit from the recent housing starts, one of the main bellwethers used to gauge how the housing market is doing, which rose more than 15%in July, beating analysts’ estimates.

Also, the numbers of new construction permits issued also rose, furthering speculation that a housing recovery is underway. And along with this housing prices are rising as well, which is a good sign.

This has the potential to create opportunities in housing stocks, such as Beazer, unlike the home prices themselves which remained flat, hovering in correction territory for much of the Spring.

Technical Details

Beazer Homes USA has a 52 week low of $15.27 and a 52 week high of $25.34. The stock has a 50-day moving average of $18.00 and a 200-day moving average of $19.65.

The company’s market cap is $498.3 million.

BZH has net institutional purchases in the current quarter at 2.6M shares, which represents about 11.98% of the company's float of 21.70M shares – with the major holder being Citadel Advisors LLC, which has a 6.98% stake.

Earnings

Beazer Homes USA last issued its quarterly earnings data on Thursday, July 31st. The company reported ($0.47) earnings per share for the quarter, missing the analysts’ consensus estimate of $0.22 by $0.69. The company had revenue of $354.67 million for the quarter, compared to the consensus estimate of $360.13 million.

During the same quarter last year, the company posted ($0.22) earnings per share. Beazer Homes USA’s revenue was up 12.8% compared to the same quarter last year. Analysts expect that Beazer Homes USA will post $0.47 EPS for the current fiscal year.

Current Quarter Estimates for BZH

In the past 30 days, 4 estimates have gone higher for Beazer Homes while none has gone lower in the same time period. The trend has been pretty favorable too, with estimates increasing from 70 cents a share 30 days ago, to $1.06 today, a move of 51.4%.

Current Year Estimates for BZH

Meanwhile, Beazer Homes’ current year figures are also looking quite promising, with 3 estimates moving higher in the past month, compared to none moving lower. The consensus estimate trend has also seen a boost for this time frame, increasing from 28 cents per share 30 days ago to 34 cents per share today, an increase of 21.4%.

Insider Buying

In August, five insiders acquired a combined 34,000 shares at an average price of $16. Those purchases follow a $300,000 buy-in by a separate insider in early June.

Analysts Opinions

Beazer Homes USA (NYSE:BZH) has earned an average recommendation of “Hold” from the seven ratings firms that are currently covering the company. One research analyst has rated the stock with a sell rating, four have issued a hold rating and two have assigned a buy rating to the company. The average twelve-month price target among analysts that have issued ratings on the stock in the last year is $20.75.

The company has been the subject of a number of research reports:-

• Analysts at Citigroup Inc. upgraded shares of Beazer Homes USA from a “sell” rating to a “neutral” rating in a research note on Friday, August 15th. They now have a $18.00 price target on the stock, up previously from $15.00.

• Separately, analysts at Compass Point reiterated a “buy” rating on shares of Beazer Homes USA in a research note on Friday, August 1st. They now have a $25.00 price target on the stock, up previously from $21.50.

• Finally, analysts at Sterne Agee upgraded shares of Beazer Homes USA from a “neutral” rating to a “buy” rating in a research note on Friday, August 1st. They now have a $22.00 price target on the stock, down previously from $23.00.

Conclusion

The stock has also started to move higher lately, adding 5.7% over the past four weeks, suggesting that investors are starting to take note of the improvement surrounding Beazer.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the BZH Jan 2015 20.000 call (BZH150117C00020000) at or under $1.10, good for the day. Place a protective stop limit at $0.45 and a pre-determined sell at $2.00.



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