Key insights
- Barclays identified building products, distributors, and homebuilders with significant share repurchase capacity, suggesting potential for increased buybacks following recent underperformance. Companies like Skyline Champion, Mohawk Industries, and Trex Company show strong buyback potential. Conversely, Fortune Brands and James Hardie have limited capacity due to debt reduction goals. KB Home screens positively for buybacks due to trading below book value, while D.R. Horton faces headwinds. This analysis could signal increased demand for these stocks, potentially boosting their prices.
Investing.com -- Barclays analyzed share repurchase capacity within its coverage universe, identifying companies with room for increased buybacks following weak year-to-date performance. Building products fell 4%, distributors declined 12%, and homebuilders dropped 3%, compared to an 11% gain in the S&P 500.
Within building products, Skyline Champion (NYSE: SKY), Mohawk Industries (NYSE: MHK), and Trex Company (NYSE: TREX) showed the most positive screening results based on dry powder as a percentage of market capitalization. Site Centers (NYSE: SITC) and CNM screened positively among distributors.
Skyline Champion holds a net cash position supporting approximately 29% of market cap in dry powder and steady buyback through fiscal year 2028. Mohawk Industries has capacity to repurchase 23% of market cap. Trex Company could repurchase 11% of market cap, with greater buybacks potentially arriving in 2027 when capacity investment nears completion.
Fortune Brands Innovations (NYSE: FBIN) and James Hardie Industries (NYSE: JHX) showed the most limited buyback capacity. Fortune Brands aims to reduce net debt leverage to below 2.5x from 3.1x currently through inventory reduction and operational improvements. James Hardie expects to reach 2.0x leverage or lower by fiscal second quarter 2028 from 3.5x at the end of fiscal fourth quarter 2026 following its AZEK acquisition.
Among homebuilders, KB Home (NYSE: KBH) screened positively given its trading below book value. D.R. Horton (NYSE: DHI) screened negatively due to offsetting reduction in book value per share.
Barclays noted that homebuilders buying back stock at multiples well above book value limits value creation. Under a hypothetical 10% market cap buyback scenario, KB Home would see an 8% share price change. D.R. Horton would see a lower share price as book value per share decline of 14% would offset a 280 basis point ROE gain.