Homebuilder Market Building New Growth?

Good Morning.  There has been an uptick in new home sales and construction in the U.S., and additionally an increase in home prices in the US.  The S&P/Case Schiller 20-city composite index rose 0.3% in February and was up 9.3% from the same period in the prior year.  This may not seem like huge growth, but it is the largest annual increase since May 2006.  If you believe that we may be in the midst of a homebuilders rebound, this stock is for you.

PGT, Inc. (NASDAQ – PGTI - $8.87) looks like a great small cap stock play in this space not only from the home building rebound perspective, but as a short-term trade candidate.  PGT manufactures residential impact-resistant windows and doors in both new construction and home repair has primarily marketed in the US Southeast and the Caribbean.  The products are designed to protect from hurricane force winds.  The Company is hoping to garner additional revenue streams as areas of the U.S. Northeast are still rebuilding from Hurricane Sandy.

Last week, PGTI posted strong 1Q13 earnings with EPS of $0.06 versus the $0.03 estimate, which marks a huge improvement over the loss of a penny per share for the same quarter last year.   Estimates for 2Q13 have gone from $0.09 to $0.11 with annual estimates at $0.34 per share in 2013 and $0.41 per share in 2014.  The top-line is forecast to increase from $175 million in 2012 to $207 million in 2013, which is an 18% increase.  This is a solid growth trend, as PGT turned a profit in 2012 after three years in the red.

The Company plans to pursue an aggressive marketing campaign this year and continue to offer promotional programs with some of its flagship products, like WinGuard.

From a purely technical trading perspective, PGT is very bullish in short term.  We think a pop up to $11.00 is possibly over the summer.

Have a great day!

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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