Seaport upgrades US homebuilders on upside potential when market improves

Seaport Research upgrades DR Horton DHI.N, Lennar LEN.N and KB Home KBH.N to "buy" from "neutral" on valuation, operating metrics

Says fall in homebuilders' shares since brokerage's September 2024 sector downgrade is consistent with usual tendency of sector to underperform in early cycle

However, brokerage has positive call for homebuilding sector assuming higher potential for upside when market improves, compared to other sectors with underperforming tendencies in later cycle

Brokerage also upgrades Pultegroup PHM.N and Meritage Homes MTH.N to "neutral" from "sell" as brokerage's sector bias supersedes fundamental headwinds such as high new supply, falling starts, margin pressure

YTD, the PHLX Housing index .HGX fell 3.5%, compared with a 4.5% rise in 2024