We suggest selective buying of ResProp stocks, as we have a NEUTRAL call on the sector. AP, LH, SC, and SIRI will see sizable condo transference, 3Q-4Q22, which will boost their profits and stock prices. We recommend accumulating LH in anticipation of strong 2H22 bottom-line growth, AP for its potential to beat our forecast, and suggest letting profits run on SC.
Quarterly earnings heading into an uptrend
2H22 aggregate coverage ResProp earnings will rise by 40-50% YoY and 15-20% HoH, according to our models. Profits will recover strongly in 3Q22 and strengthen in 4Q22. Our forecasts are in line with the historical pattern—ResProp sales tend to be concentrated in 2H22 and peak in 4Q22. Our models point to QoQ coverage core earnings growth of 10-15% for 3Q22, then single digits for 4Q22.