Homebuilder stocks tumbled on Tuesday after Core & Main slashed its outlook, citing lower residential demand. Declines reverberated across the industry, as the likes of PulteGroup and Home Depot retreated.
Infrastructure and drainage provider Core & Main late Monday cut its outlook, noting higher operating expenses and softer residential demand in the current environment.
CEO Mark Witkowski during the company's second quarter earnings call on Tuesday noted that single-family housing development slowed during the quarter, particularly in the Sunbelt markets.
"We believe that higher interest rates, affordability concerns and lower consumer confidence are weighing on demand for new homes," Witkowski said. "Until these macro headwinds ease, we expect the activity in this end market will continue to soften through the second half (of the year)."
Core & Main lowered its full-year sales forecast to range from $7.6 billion and $7.7 billion, reducing the top end of its prior guidance from $7.8 billion.
That represents 2% to 3% sales growth, with average daily sales growth of 4% to 5%. Core & Main previously expected 2% to 5% sales growth, with average daily sales up 4% to 7%.
The company also lowered its Adjusted EBITDA outlook to range from $920 million to $940 million for the year, from its Q1 forecast for $950 million to $1 billion.
Core & Main earnings increased 13% to 87 cents per share, which topped views for 78 cents. Net sales rose 6% to $2.09 billion, slightly missing.
Core & Main, Homebuilder Stocks Tumble
Core & Main shares crashed 25.4% on Tuesday, diving back below their 200-day moving average after hitting a record high on Friday.
The SPDR S&P Homebuilders ETF retreated 2.9% Tuesday. Shares of the ETF dropped back below a 116.24 cup-with-handle buy point on the move. The ETF has advanced the past three months.
Advanced Drainage Systems carved nearly 7% lower Tuesday.
PulteGroup fell 3.3%, back into a buy zone. DR Horton reversed to climb 0.5%.
Home Depot slid 1.1% Tuesday, making it one of the worst performers in the Dow Jones Industrial Average on the day. HD stock is testing a buy point that it cleared last week.
Paint and coatings company Sherwin-Williams fell 3.7%, while Dow Jones heavy construction equipment firm Caterpillar dipped 1.1%.
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