Author: vipin khare

Quick Review of Setups for U.S. Homebuilders Post-June Quarter Results

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Attached is a note from Vipin Khare, Director, Research Analyst and Neel Vaghasiya, Equity Research Analyst on U.S. homebuilders.

 

Key points from this report:

 

  • Quarter ended June 2025 – key homebuilders reported a revenue and earnings beat, while order intake missed estimates.
  • Key highlights from management commentary:
    • Weak affordability due to elevated home prices and mortgage rates.
    • Continued use of incentives to generate sales will impact margins.
    • Some builders buying Canadian lumber to be impacted as tariffs take effect this month.
    • Labor availability has improved driving a decrease in construction cycle time.

O’Neil Capital Equipment Sector Weekly

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Axon Enterprise (AXON): Reported better-than-expected Q2 FY25 results. Revenue (+33% y/y) and adjusted EPS (+74% y/y) beat estimates by 4% and 44%, respectively. The stock
gapped above its 50-DMA post print and made a new all-time high. It is extended from an ideal entry point. Wait for a low-volume pullback to its short-term moving averages before
adding positions.

O’Neil Capital Equipment Sector Weekly

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Sector Summary

  • XLI has outperformed the S&P 500 by 20bps over the past five days and by 870bps year-to-date.
  • We are Overweight on the Capital Equipment sector in the U.S. Focus List and Underweight in the Developed and Emerging Markets Focus Lists.
  • In terms of industry groups (#1=best; #197=worst):
    • Top-ranked groups include Heavy Construction (#2), Steel Alloys (#4), Building Maintenance (#6), and Aerospace and Defense (#7).
    • Lowest-ranked groups include Wood Products (#196), Mobile Homes (#192), Hand Tools (#186), and Staffing (#185).
  • HVAC (#40 versus #149 last week), Document Management (#32 versus #135), Building Maintenance (#6 versus #74), Mining Machinery (#47 versus #97), and Electrical Equipment (#27 versus #70) have shown the most improvement in Group Rank over the last week.
  • Of the total 32 industry groups under coverage, nine are ranked within the overall top 50, compared with five in the prior week.

O’Neil Capital Equipment Sector Weekly

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Diploma (DPLM.GB; DPLM LN) – $9B market cap; $19M ADV: We added Diploma to the Developed Markets Focus List as the stock broke out of a stage-one seven-week cup-with handle base on above average volume. Diploma is a distributor of critical components with strong pricing power. Its key products include wires, cables, fasteners, seals, and medical
instruments. The company’s transition to the high-growth end market is driving revenue growth and its acquisition strategy is aiding organic growth capabilities. Consensus expects
revenue and adjusted EPS CAGR of 7% and 10% in FY24–27, respectively. Fundamental & Technical note

O’Neil Capital Equipment Sector Weekly

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EXL Service (EXLS) – $7B market cap; $101M ADV: We removed EXL Service from our U.S. Focus List as the stock breached support along its 200-DMA and is facing
resistance at that level. On June 20, Accenture reported its Q3 FY25 results. Its bookings declined 7% y/y, with the slowdown in generative AI-related bookings growth. This suggests
softer client demand, which is weighing on IT services peers, including EXL Service. Support is at $43.00 (-4%). Fundamental & Technical note

O’Neil Capital Equipment Sector Weekly

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Boeing (BA): A broker upgraded the stock to Buy from Neutral and raised price target by ~53% to $275 from $180, citing positive operational and financial improvements at the company
since the new CEO took office last year. The stock reclaimed its 21-DMA on above average volume. It is trading above all its key moving averages and 4% off its 52-week high. RS line
has been flat over the past few weeks but has a good RS Rating of 86. Acc/Dist Rating of B.

O’Neil Capital Equipment Sector Weekly

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Tecnoglass (TGLS) – $4B market cap; $27M ADV: We removed Tecnoglass from the U.S. Focus List as the stock pulled back sharply after a failed breakout and breached its 50-
DMA. On June 18, U.S. housing data came in weaker than expected, with housing starts and building permits down 9.8% m/m and 2.0% m/m, respectively. This could have weighed
down on the stock. It is testing support at its 100-DMA, with next support at its 200-DMA (-1%). Fundamental & Technical note

O’Neil Capital Equipment Sector Weekly

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HD Hyundai Marine Solution (HH5.KR; 443060 KS) – $7B market cap; $41M ADV: We added HD Hyundai Marine Solution to the Emerging Markets Focus List as the stock broke out of a stage-one, 20-week
cup base on above average volume into a new all-time high and is actionable here. The company is the only player offering full ship lifecycle services (repair, maintenance, and retrofit) under one roof. Key growth
drivers include its preferred vendor status for all aftermarket work on HD Hyundai-built vessels (the world’s largest shipbuilding group), rising share of dual-fuel engine ships, and strong demand for eco-friendly
retrofit systems to reduce emissions. Consensus expects revenue and EPS CAGR of 18% and 22%, respectively, in FY24–26. Fundamental & Technical note (HH5.KR

O’Neil Capital Equipment Sector Weekly

Posted on by vipin khare

Sector Summary

  • XLI has underperformed the S&P 500 by 80bps over the past five days and outperformed by 670bps year-to-date.
  • We are Overweight on the Capital Equipment sector in the U.S. and Emerging Markets Focus Lists and Underweight on the sector in the Developed Markets Focus List.
  • In terms of industry groups (#1=best; #197=worst):
    • Top-ranked groups include Steel-Specialty Alloys (#3), Aerospace/Defense (#5), and Security/Sfty (#19).
    • Lowest-ranked groups include Bldg-Wood Prds (#194), Comml Svcs-Staffing (#186), and Bldg-Resident/Comml (#183).
  • Containers/Packaging (#122 versus #150 last week), Trucks & Parts-Hvy Duty (#144 versus #167), and Machinery-Constr/Mining (#111 versus #134) have shown the most improvement in Group Rank over the last week.