Taylor Morrison Home Corporation (TMHC):: Resilient Demand and Capital-Light Approach— Are Rising Costs and Insurance Challenges Set to Weigh on LT Growth?

Taylor Morrison’s Q3 2024 results showcase operational excellence and strategic discipline, with adjusted EPS of $2.37 (+50% YoY) beating estimates by $0.33 and total revenue of $2.12 billion exceeding forecasts by $152.69 million, driven by 3,394 closings (+29% YoY) at an average price of $598,000. Gross margin of 24.8% and net order growth of 9% YoY underscore demand resilience across key consumer segments, particularly in resort lifestyle (+20% YoY) and move-up (+8%) categories. Taylor Morrison’s diversified strategy, leveraging to-be-built homes (40% of sales) and spec inventory (~1.8 units per community), supports tailored affordability solutions, with forward adherence utilized in 33% of closings. The company’s pivot to a capital-light model, with 58% controlled lots and a $1 billion land banking facility, is driving capital efficiency and targeting a 6% ROIC uplift, while FY24 gross margin guidance of ~24.3% highlights pricing resiliency and operational discipline. Challenges include rising insurance costs in coastal markets (+5–6% YoY for new construction) and escalating land costs (~10% YoY inflation), though Taylor Morrison’s insurance subsidiary (59% capture rate) and pricing power help mitigate impacts. With guidance for 12,725 closings (+10% YoY) and a $600,000 average price, alongside $2.5 billion in FY24 land investments, Taylor Morrison is well-positioned to grow its community count and sustain mid-to-high teens ROE. However, can the company maintain its operational and pricing strengths to offset rising costs and insurance challenges while capitalizing on long-term housing demand?