巴克莱-美股-住宅与建筑产品行业-美国住宅与建筑产品：管理问题汇总-2019.2.15-26页.pdf

Equity Research 15 February 2019 CORE Barclays Capital Inc.and/or one of its affiliates does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 21.Restricted-Internal U.S.Homebuilding&Building Products Management Question Pack We are hosting meetings with eleven companies over the next week between the 36th Annual Barclays Industrial Select Conference in Miami and the NAHB International Builders Show in Las Vegas.Ahead of the meetings,we are publishing our Management Question Pack with suggested questions on key issues and industry topics for these companies,along with summaries of our financial models.Please feel free to contact us to request any of our full financial models.INDUSTRY UPDATE U.S.Homebuilding&Building Products NEUTRAL Unchanged U.S.Homebuilding&Building Products Matthew Bouley+1 212 526 9029 BCI,US Christina Chiu+1 212 526 1341 BCI,US Marshall Mentz,CPA+1 212 526 5941 BCI,US Barclays|U.S.Homebuilding&Building Products 15 February 2019 2 CONTENTS HOMEBUILDERS.3 KB Home(KBH,Equal Weight,$20 Price Target).3 Lennar Corp.(LEN,Overweight,$52 Price Target).5 BUILDING PRODUCTS.7 Fortune Brands Home&Security,Inc.(FBHS,Equal Weight,$45 Price Target).7 JELD-WEN Holding Inc.(JELD,Overweight,$20 Price Target).9 Masco Corp.(MAS,Overweight,$39 Price Target).11 Masonite International Corp.(DOOR,Not Covered).13 Mohawk Industries Inc.(MHK,Overweight,$145 Price Target).14 NCI Building Systems,Inc.(NCS,Equal Weight,$9 Price Target).16 Trex(TREX,Not Covered).18 BUILDING MATERIALS DISTRIBUTION.19 Builders FirstSource Inc.(BLDR,Equal Weight,$13 Price Target).19 Barclays|U.S.Homebuilding&Building Products 15 February 2019 3 HOMEBUILDERS KB Home(KBH,Equal Weight,$20 Price Target)Key Questions In regard to the initiatives to shift towards adding a larger percentage of smaller square footage plans to existing and new KBH communities,what has been the progress on these plans?Could you quantify the impact on margins,price,and sales pace that these sales may have?Have you seen pace improve in January/February in line with commentary from other builders?How have traffic and demand tracked alongside the development of your community repositionings in light of potentially improving demand?How do you see the build-to-order model faring in an environment with increasing competitive intensity from other builders with a larger spec offering?In addition to Northern California,are there other key markets where you will be focusing on increasing community count in 2019?How is KBH positioned against increasing re-sale inventory in California ahead of the spring selling season?Has anything changed in your thought process around reactivating inactive assets in light of the recent slowing in housing?How are you thinking about land spend going forward in 2019?What do you see as your ideal years land supply at this point?Any update on owned vs.option strategies?How are you thinking about the pace-price balance in a softer market?During the slowdown in 4Q18,did you see any difference in overall activity based on price point(first-time vs.move-up vs.luxury)?Regionally?Are there particular price-points and regions in which you will be either scaling up or down in 2019?Any thought on evolving spec strategy at this stage?How do you view the optimal capital allocation strategy in 2019?Margins What type and how much of cost inflation is incorporated in your current gross margin guidance?Given the current affordability environment and the small uptick in incentives in the 4th quarter,and noting KBH is less of an“incentive builder,”have you considered offering additional incentives to customers,and if so in what form?Do you see lumber price tailwinds as persisting through 2019?Can you quantify the estimated effect on margins?How does the pricing environment look going into this spring selling season in comparison to previous seasons?How are you managing the material and labor cost headwinds as we move through the first quarter and the rest of the year?Has the mix shift to smaller square footage homes changed your average delivery times for customers?Barclays|U.S.Homebuilding&Building Products 15 February 2019 4 FIGURE 1 KBH Summary Model Source:Company data,Barclays Research estimates KB Home20122013201420152016201720182019E2020ETotal Revenue($mln)$1,560$2,097$2,401$3,032$3,595$4,369$4,547$4,526$4,693 Y/Y Chg.%19%34%14%26%19%22%4%(0%)4%Pre-tax Income($mln)($79)$38$95$127$149$290$368$353$353 Pre-tax margin(5.1%)1.8%4.0%4.2%4.2%6.6%8.1%7.8%7.5%EPS($0.76)$0.46$9.25$0.85$1.12$1.84$1.68$2.71$2.73 Return on Equity(15.3%)8.4%12.3%5.2%6.4%10.1%12.9%10.7%9.7%Tangible Book Value Per Share$4.81$6.28$17.08$17.90$19.73$20.98$22.59$24.95$27.38 HomebuildingHB Revenues($mln)$1,548$2,084$2,370$2,908$3,576$4,335$4,517$4,500$4,666 Y/Y Chg.%19%35%14%23%23%21%4%(0%)4%Gross Margin%13.5%18.3%18.6%16.6%16.6%16.9%18.1%18.3%17.9%SG&A%15.3%12.3%12.2%11.8%10.9%9.8%9.8%10.7%10.7%Unit MetricsOrders(units)6,703 7,125 7,567 9,253 10,283 10,900 11,014 11,339 11,425 Y/Y Chg.%1%6%6%22%11%6%1%3%1%Community Count182 200 244 238 235 221 245 249 Y/Y Chg.%10%22%(2%)(1%)(6%)11%2%Sales Per Community39 38 38 43 46 50 46 46 Y/Y Chg.%(3%)0%14%8%7%(7%)(1%)Deliveries(units)6,282 7,145 7,215 8,196 9,829 10,909 11,317 11,698 12,137 Y/Y Chg.%8%14%1%14%20%11%4%3%4%Deliveries-Average Selling Price($000s)$246$292$328$355$364$397$399$385$384 Balance Sheet/Cash FlowNet-debt to Capital 76%75%58%55%54%45%42%34%22%Total Lot Count44,752 61,095 52,198 47,399 44,825 46,371 53,627 55,433 53,870 Years Supply of Land(LTM)7.1x 8.6x 7.2x 5.8x 4.6x 4.3x 4.7x 4.7x 4.4x Cash Flow from Operations($mln)$35($443)($631)$181$189$513$222$324$466 Barclays|U.S.Homebuilding&Building Products 15 February 2019 5 Lennar Corp.(LEN,Overweight,$52 Price Target)Key Questions How has the dynamic pricing model increased LENs agility around pricing and incentives?Has LEN been able to more quickly pull back on incentive usage as demand has improved sequentially into February?As incentives across builders increased towards the end of 2018,do you foresee these higher incentives continuing through 2019 or lessening throughout the year?What forms of incentives has LEN been offering and which will it continue to offer?How is the competitive environment evolving?In which regions have you had more success with incentives?In which regions have you had less success?With the Rialto sale complete,what do you see as the next step in monetizing your ancillary businesses?How quickly can LEN deploy the new$1 bn share repurchase authorization in light of upcoming debt maturities?What tangible benefits have you seen thus far from the enhanced local scale resulting from the CAA acquisition?Thinking specifically about land deals?What financial benefits has LEN seen or should we expect to see out of recent technology initiatives(i.e.Opendoor,Blend,Hippo etc.)?During the slowdown at the end of 2018,did you see any difference in overall activity based on price point(first-time vs.move-up vs.luxury)?Did you see any difference based on region?Are there particular price-points and regions in which you will either be scaling up or down in 2019?How does your future land portfolio mix of entry-level vs.move-up lots compare vs.the mix over the past year?How should we think about the shift towards merchant building in the multifamily business?Can you tell us any more about the promotion of Fred Rothman to COO?Any additional color on his background?Margins What are your objectives for managing gross margin given a focus on inventory turnover,as well as the price-cost pressure with higher incentives and cost inflation seen in the second half of 2018?What is LEN doing to mitigate labor inflation?On the SG&A side,are there going to be further reductions in headcount due to increasing technology investment?Land How would you characterize the land market now vs.last year?Has tax reform changed any competitive dynamics?How about the recent softening in housing?Can you give more color on your strategy in reshaping the land program?Youve previously talked about the three initial partnerships which provided access to Barclays|U.S.Homebuilding&Building Products 15 February 2019 6 approximately 20,000 additional home sites.What is the long-term goal with this program?Are additional partnerships in the works?How should we think about the shift in land strategy towards a higher percentage of home sites controlled via option contracts?FIGURE 2 LEN Summary Model Source:Company data,Barclays Research estimates Lennar20122013201420152016201720182019E2020ETotal Revenue($mln)$4,105$5,932$7,780$9,474$10,950$12,646$20,572$22,766$23,773 Y/Y Chg.%33%45%31%22%16%15%63%11%4%Pre-tax Income($mln)$236$676$992$1,205$1,349$1,376$2,123$2,480$2,625 Pre-tax margin 5.8%11.4%12.8%12.7%12.3%10.9%10.3%10.9%11.0%EPS$3.11$2.15$2.80$3.46$3.93$3.44$5.46$5.80$6.27 Return on Equity22.2%13.2%14.4%15.5%14.7%11.2%16.7%15.9%14.8%Tangible Book Value Per Share$15.29$18.47$21.07$24.42$30.26$32.56$34.10$39.67$45.72 HomebuildingHB Revenues($mln)$3,492$5,292$6,840$8,336$9,559$11,035$18,811$20,692$21,532 Y/Y Chg.%33%52%29%22%15%15%70%10%4%Gross Margin%23.0%24.9%25.1%24.0%23.0%22.1%19.6%20.7%20.7%SG&A%16.2%13.3%13.0%12.6%11.8%11.8%10.4%10.1%9.9%Unit MetricsOrders(units)15,714 19,043 22,029 25,106 27,372 30,348 45,826 49,531 50,956 Y/Y Chg.%38%21%16%14%9%11%51%8%3%Community Count(Ending)459 537 644 665 695 765 1,329 1,323 1,337 Y/Y Chg.%9%17%20%3%5%10%74%(0%)1%Sales Per Community36 38 38 38 40 41 34 37 38 Y/Y Chg.%39%7%(1%)1%4%2%(16%)8%2%Deliveries(units)13,802 18,290 21,003 24,292 26,563 29,394 45,627 50,187 51,591 Y/Y Chg.%27%33%15%16%9%11%55%10%3%Deliveries-Average Selling Price($000s)$257$293$327$345$362$377$413$413$418 Balance Sheet/Cash FlowNet-debt to Capital 46%46%44%42%33%34%35%28%21%Total Lot Count128,484 153,776 164,569 165,863 159,045 178,653 270,000 289,507 298,370 Years Supply of Land(LTM)9.3x 8.4x 7.8x 6.8x 6.0 x 6.1x 5.9x 5.8x 5.8x Cash Flow from Operations($mln)($425)($808)($788)($420)$508$997$1,871$2,011$1,899 Barclays|U.S.Homebuilding&Building Products 15 February 2019 7 BUILDING PRODUCTS Fortune Brands Home&Security,Inc.(FBHS,Equal Weight,$45 Price Target)Key Questions Can you outline the swing factors between the upper and lower end of 19 guidance?How are you managing the potential of a 25%tariff in March?What level of net tariff headwind is incorporated in guidance?In the context of your three-year guidance,how should we think about the ability to recover cabinets margins in light of increasing competition in value cabinetry?How does the synergy between the combination of Doors&Security support margins there?How does Master Lock fit into the long-term portfolio thinking for FBHS?What are you seeing in terms of ticket size for bigger ticket projects at this stage in the housing cycle?Are you seeing consumers tap home equity for larger projects?For 2019,how impactful are the new partnerships in Plumbing?What about the product launches in Cabinets?How can we think about cost tailwinds in Security in 4Q19?Cabinets What is FBHSs current market share at the lower end/value segment?What is your target market share?Could you provide some guidance as to what youre seeing from Chinese import competition?Can you quantify what effect the 10%tariffs on Chinese imports have had on competition?What effect do you expect a 25%tariff might have?What would you characterize as the“limit”or“ceiling”to the penetration of Chinese imports in the North American cabinets market?How do you see innovation happening in the Cabinets space?Are there new products or design enhancements in the pipeline?As demand has shifted towards simpler cabinet designs in recent years,how has the production and import capability from Mexico contributed to FBHSs competitive advantage vs.North American peers and international competitors?What is the margin profile of simpler cabinet designs vs.customized cabinets?Are there plans to reduce production costs for these new cabinet designs?In terms of material conversion,how has DLV played a role in lowering production costs?Given that it is now 50%of your in-stock kitchens at home centers and 40%of the products shipped to builders,would you say there is more room for material conversion?Plumbing How are you thinking about managing and positioning the portfolio of brands,especially in the higher luxury tier?Is there possibility of cannibalization?Is the Plumbing segment exposed to similar mix-down trends that other building products companies have been experiencing?Barclays|U.S.Homebuilding&Building Products 15 February 2019 8 How have consumer trends and shifting stylistic preferences defined changes to the brand portfolio and driven growth?Given that this part of the business plays in China and youve mentioned additional efforts to continue taking share in China(currently#3 position),what are the implications of the trade war on this revenue piece?Can you outline the additional opportunities to drive lower margins,specifically on supply chain and operational efficiencies?Doors&Security How do you think about quantifying the potential distribution synergies derived from combining the two segments?Have you found new synergies between Fiberon and the legacy businesses?What strategy are you considering for additional M&A opportunities in this segment?Can you quantify the process of simplifying the product lines in both Therma-Tru doors and Master Lock?What are the potential production cost savings?How is Fiberon positioned relative to competitors to maintain its current market share?What technological development opportunities are you exploring that allow for greater synergies within the segment(i.e.smart doors,connected home,security)?FIGURE 3 FBHS Summary Model Source:Company data,Barclays Research estimates Fortune Brands Home&Security201420152016201720182019E2020ETotal Revenues($mln)$4,246$4,579$4,985$5,283$5,485$5,828$5,978%growth8.4%14.1%8.9%6.0%3.8%6.2%2.6%Op.Profit(ex.charges,$mln)$430$538$658$716$705$786$820 Op.Profit Margin%10.1%11.8%13.2%13.5%12.8%13.5%13.7%Incremental Op.Margin%25.0%19.1%29.4%19.5%-5.5%23.8%22.5%Adjusted EBITDA($mln)$542$649$779$855$874$949$981 Adjusted EBITDA Margin%12.8%14.2%15.6%16.2%15.9%16.3%16.4%Adjusted Diluted EPS$1.78$2.07$2.78$3.08$3.34$3.68$4.06Balance Sheet&Cash FlowFree Cash Flow($mln)$126$283$501$435$454$499$550 FCF/Adj.EBITDA23.3%43.6%64.3%50.9%51.9%52.6%56.1%Net Debt($mln)$478$934$1,180$1,185$2,071$1,869$1,632 Net Debt/Adj.EBITDA0.9x1.4x1.5x1.4x2.4x2.0 x1.7xROIC8.9%9.7%11.3%11.5%11.0%11.4%11.8%SegmentsCabinets Sales($mln)$1,788$2,173$2,398$2,467$2,419$2,455$2,504%growth8.8%21.6%10.3%2.9%(2.0%)1.5%2.0%margin7.7%9.0%10.8%11.0%9.6%10.3%10.