BofA/Merrill Lynch Resumes Homebuilder Coverage (TOL, BZH, KBH, RYL, DHI, HOV, PHM, LEN, MDC, XHB)

Bank of America/Merrill Lynch has initiated coverage of the homebuilder sector this morning.  Technically this is a resumption of coverage.  While some are positive calls, there are still some cautious undertones here from the firm.  Toll Brothers Inc. (NYSE: TOL) was initiated with an “Underperform” rating with a $16.00 target.  The “Neutral” rated homebuilder is Beazer Homes USA Inc. (NYSE: BZH) with a $4.50 target.  The “BUY” rated homebuilders are as follows:

• KB Home (NYSE: KBH) with a $20 target,
• Ryland Group Inc. (NYSE: RYL) with a $28 target,
• DR Horton Inc. (NYSE: DHI) with a $16 target,
• Hovnanian Enterprises Inc. (NYSE: HOV) with a $5 target,
• Pulte Homes Inc. (NYSE: PHM) with a $13 target,
• Lennar Corp. (NYSE: LEN) with a $21 target,
• and MDC Holdings Inc. (NYSE: MDC) with a $43 target.

There has hardly been any reaction in the SPDR S&P Homebuilders (NYSE: XHB) this morning, but most of these components are indicated higher after coverage was initiated this morning.

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JON C. OGG
FEBRUARY 17, 2010