LGIH - Why the Market Slammed LGI Homes for Stellar Q4 Earnings
Sometimes a stock tanks because it missed analysts' earnings expectations. Other times, it's because it missed revenue forecasts. Or sometimes the company's numbers are fine, but its guidance is weak. And then there are occasions when a company outperforms expectations and issues strong guidance, and shares tumble anyway. That's what happened to homebuilder LGI Homes (NASDAQ: LGIH) after it reported Q4 2019 earnings on Feb. 25.
The company's strong earnings somehow prompted a 14.3% drop in its share price. While it was a tough day all around -- the S&P 500 was down 3% -- LGI vastly underperformed both the market and the broader homebuilding industry. Here's the likely reason why.
LGI Homes specializes in starter homes, which is a top-selling area of the market. Image source: Getty Images.