NEW YORK—An analyst is trimming earnings estimates for some homebuilders due to the exposure to flooding in Colorado.
Floods in Colorado this month have killed seven and wreaked havoc across 17 counties and 2,000 square miles. Some 200 miles of state highways and 50 bridges were destroyed.
Jay McCanless of Sterne, Agee & Leach said in a client note that MDC Holdings Inc. and Meritage Homes Corp. have the largest exposure to Denver of the homebuilders he covers. MDC has about 8.5 percent of its communities in Denver, while Meritage has approximately 8 percent, McCanless said.
The analyst believes that MDC and Meritage may lose about one month of orders in the Denver area due to the floods. McCanless also thinkgs that some home closings that were supposed to occur in September will now be shifted to October.
But the analyst is still confident in the companies, since this is likely a one-time event. McCanless said that MDC and Meritage also have less than 10 percent of their active communities in Denver. The analyst considers MDC an attractive name for long-term stockholders and still views Meritage as one of his top homebuilder picks.
McCanless lowered MDC’s 2013 earnings estimate to $6.67 from $6.69 per share and trimmed the 2014 forecast to $2.37 from $2.46 per share. For Meritage, the analyst now expects earnings of $2.77 per share for 2013, down from $2.79 per share. He cut the 2014 earnings forecast to $3.97 from $4.08 per share.
Meritage shares finished at $43.34 on Friday while MDC ended the week at $30.70.
