The Zacks Analyst Blog Highlights: D.R. Horton, Fortune Brands, USG, PPG Industries and International Paper

CHICAGO, May 25, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: D.R. Horton (NYSE: DHI), Fortune Brands (NYSE: FO), USG (NYSE: USG), PPG Industries (NYSE: PPG) and International Paper (NYSE: IP).

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Here are highlights from Tuesday's Analyst Blog:
New Home Sales Up, Still Ugly

New Home Sales in April rose by 7.3% from April, to a rate of 323,000. Relative to a year ago, sales are down 23.1%. While the rebound is more than welcome, it is still a very dismal rate of New Home sales.

In additional good news about the direction of new home sales, the March sales levels were revised up to an annual rate of 301,000 from 300,000. Thus, relative to where we thought we were, it could be seen as a 7.7% increase.

The April level was substantially better than the expected rate of 300,000. Still, the 12 lowest months on record (back to 1963) for new home sales have all been in the last year. We are down sharply from a year ago, but that was against a "tough" comp, as sales were inflated by the rush to get in under the wire and collect the homebuyer tax credit. Sales collapsed after that, so the May comp should be an easy one. Relative to the peak of the housing bubble (July 2005, 1.389 million) new home sales are down 76.7%.

New home sales fall sharply before all recessions (with the exception of the dot.com bust caused recession of 2001) and then start to increase sharply in the middle of, or towards the end of the recession. That clearly is not happening this time around.

If you want to know why the recovery has been anemic so far, look no further than the graph above! New home sales are vital to the overall economy. If new homes are not selling, then home builders have no reason to build more of them. After all, that is very expensive inventory to sit on.

New Homes & Economic Activity

Unlike used home sales, each new home built creates a huge amount of economic activity. Not only are low new home sales bad for the big homebuilders like D.R. Horton (NYSE: DHI), but also for all the companies that make the products and supplies that go into making a new house. They range from Fortune Brands (NYSE: FO) for plumbing fixtures and cabinets to USG (NYSE: USG) for wallboard to PPG Industries (NYSE: PPG) for glass and paint to International Paper (NYSE: IP) for lumber.

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