As previously reported, Barclays analyst Michael Dahl downgraded Toll Brothers (TOL) to Underweight and keeps a $37 price target for the shares. The analyst says his firm's June agency survey indicated moderating buyer traffic trends. He sees risk that near-term catalysts for builders will disappoint relative to rising expectations. As such, Dahl recommends "tactically" reducing exposure to homebuilder stocks. Along with Toll Brothers, the analyst this morning downgraded TRI Pointe (TPH), PulteGroup (PHM) and Lennar (LEN) to Equal Weight. He also upgraded CalAtlantic (CAA) to Equal Weight. Dahl reiterates Underweight ratings on KB Home (KBH), Meritage Homes (MTH) and Realogy (RLGY).

Zelman upgraded PulteGroup to Outperform from Neutral.

BTIG analyst Carl Reichardt raised the firm's price target on PulteGroup to $133 from $122 and keeps a Buy rating on the shares after its Q1 earnings beat. The outperformance was driven by delivery volume, gross margin, financial services income and a lower tax rate, though these were partially offset by lower average selling prices, SG&A ex-the benefit and land sales profit, the analyst tells investors in a research note. BTIG maintains that PulteGroup's high relative returns, conservative balance sheet, balanced product mix and scale advantages over many smaller peers are underappreciated.

Reports Q1 revenue $3.95B, consensus $3.58B. "PulteGroup reported outstanding financial results that included first quarter records for home sale revenues of $3.8 billion, gross margins of 29.6% and earnings per share of $3.10, all of which helped to drive a return on equity* of 27.3%," said PulteGroup President and CEO Ryan Marshall. "Our strong financial performance reflects both favorable demand conditions and our balanced operating model that allows us to more effectively meet the individual needs of first-time, move-up and active-adult consumers. After more than a decade of underbuilding, it is estimated that our country has a structural shortage of several million homes," added Marshall. "Given PulteGroup's broad operating platform and deep product portfolio, along with the powerful incentive programs we can offer to help improve the overall affordability equation, we are well positioned to expand our market share while helping to provide much needed new housing stock."

Bullish option flow detected in Toll Brothers with 1,008 calls trading, 1.1x expected, and implied vol increasing over 1 point to 37.16%. 4/26 weekly 115 calls and 4/26 weekly 114 calls are the most active options, with total volume in those strikes near 320 contracts. The Put/Call Ratio is 0.54. Earnings are expected on May 21st.