Beazer (BZH) Acquires Communities From Bill Clark Homes

Beazer Homes USA, Inc. (NYSE:BZH) recently announced the purchase of more than 450 lots across three new home communities in Myrtle Beach and four in Raleigh. The assets were purchased from Bill Clark Homes, a leading private homebuilder in the Carolinas.

The deal is valued at approximately $29 million and the company funded it through available cash.

Significant Top and Bottom-Line Contributions

The acquired communities will be incorporated into Beazer’s existing operations in Myrtle Beach and Raleigh and are expected to start contributing immediately to profits and return on assets, without increasing leverage.

In fiscal 2018, these acquired properties are likely to contribute significantly to Beazer’s revenues and adjusted EBITDA.

The Larger Picture

The acquisition is part of the company’s plan to drive capital intensive growth. There are three main factors in this investing strategy.

First, Beazer is accelerating acquisition of gatherings sites and age-restricted condominium communities. Second, the company’s traditional community acquisition activities are focused on delivering extraordinary value at an affordable price. Third, Beazer will spend more on land development, including about $60 million on formerly land held assets.

These activities are expected to drive community count in fiscal 2019 and 2020.

Stock Price Movement

Beazer’s shares have gained more than 39.6% in the last six months, surpassing 30.4% growth of its industry. Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 130.5%. Meanwhile, estimates for the current year and next have been stable over the last 30 days.

Zacks Rank & Stocks to Consider

Beazer carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the sector are United Rentals, Inc. (NYSE:URI) , Patrick Industries, Inc. (NASDAQ:PATK) and Armstrong World Industries Inc (NYSE:AWI) . All three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Rentals, Patrick Industries and Armstrong World Industries’ earnings growth is projected at 18.1%, 18.9% and 9%, respectively, in 2018.

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