UBS analyst Susan Maklari upgraded Toll Brothers (TOL) to Buy on the belief that housing market volumes will accelerate entering 2016 amid a re-emergence of the entry level buyer. The trend is likely to hold though 2017 and bring improved operating leverage to builders, Maklari tells investors in a research note. She raised her price target for Toll Brothers shares to $48 from $35. The home builder closed yesterday up 33c to $38.81. The analyst today also upgraded D.R. Horton (DHI) to Buy and downgraded Meritage Homes (MTH) to Sell. She kept Buy ratings on Beazer Homes (BZH), PulteGroup (PHM) and Ryland Group (RYL).

UBS raised the firm's price target on D.R. Horton to $200 from $192 and keeps a Buy rating on the shares following the "solid" Q2 results and outlook. D.R. Horton is a best-in-class operator that consistently demonstrates the ability to execute at a high level notwithstanding the interest rate environment, the analyst tells investors in a research note. UBS expects the company and other large public homebuilders to continue benefiting from strong demographic demand support, tight existing home inventory and size/scale/financing advantages relative to most private competitors.

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Says Florida market still feels good. Says back to normal in terms of inventory turns. Says multifamily platform continues to grow. Says sees prospects for cash flow on a consolidated basis to be increasing into 2025. Says seen a period of volatility in rate environment over the last week. Says pleased with gross margins this quarter. Says moves rates along with the market. Says customers reacting very positively to incentives offered. Comments taken from Q2 earnings conference call.

In Q2: Homes closed increased 15% to 22,548 homes and 14% in value to $8.5B. Net sales orders increased 14% to 26,456 homes and 17% in value to $10.1B.

FY24 consensus $36.32B. Sees FY24: Homes closed by homebuilding operations of 89,000 homes to 91,000 homes; Share repurchases of approximately $1.6B; Income tax rate of approximately 23.5% to 24.0%. The company reiterates its fiscal 2024 guidance for cash flow provided by homebuilding operations of approximately $3B.

Notable companies reporting before tomorrow's open, with earnings consensus, include Blackstone (BX), consensus 96c... Elevance Health (ELV), consensus $10.53... D.R. Horton (DHI), consensus $3.06... Genuine Parts (GPC), consensus $2.16... Snap-on (SNA), consensus $4.64... Keycorp (KEY), consensus 22c... Ally Financial (ALLY), consensus 33c... Alaska Air (ALK), consensus ($1.05).