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MDC's Earnings Miss Estimates in Q3, Gross Margin Declines
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M.D.C. Holdings, Inc. reported lackluster earnings for third-quarter 2022c, which missed the Zacks Consensus Estimate and declined year over year. Revenues topped the consensus estimate and rose year over year.
In a bid to stay competitive in the current market condition, MDC is offering great opportunities for the build-to-order buyers, such as long-term interest rate lock programs and other special incentives.
Shares of this leading homebuilder inched up 0.22% on Oct 27, post earnings release.
MDC's executive chairman, Larry A. Mizel, said, "Interest rate volatility and overall economic uncertainty took a toll on our sales efforts in the third quarter, as we experienced a slowdown in demand coupled with a sharp increase in cancellations. Buyer psychology continued to be adversely affected by the negative news flow surrounding housing market conditions and the overall economy, leading to a disappointing net order result for the quarter. While we believe that the long-term outlook for new home construction is positive and that there is a strong desire to own a home in this country, we expect near-term demand trends to remain challenged until interest rates stabilize."
Earnings & Revenue Discussion
The company reported quarterly earnings of $1.98 per share, which lagged the consensus estimate of $2.24 by 11.6% and fell 0.5% from the year-ago quarter’s figure of $1.99. The downside was due to prevailing softness in housing demand and other industry headwinds.
M.D.C. Holdings, Inc. Price, Consensus and EPS Surprise
Total revenues (including Home sale revenues and Financial Services revenues) of $1.44 billion topped the consensus mark of $1.41 billion by 2.6% and increased 10.8% on a year-over-year basis from $1.3 billion reported a year ago.
Segment Details
Homebuilding: Home sale revenues of $1.41 billion increased 12% from the prior-year period’s levels, backed by a 13% higher average selling price or ASP. Units delivered were down 1% from the year-ago level to 2,387 homes. New home deliveries were down in West and Mountain, while East grew 14%.
Gross new orders fell 47% from the prior-year quarter to 1,569 homes and net new orders fell 88% to 299. The value of net orders also declined 88% from the year-ago quarter’s levels to $152.8 million due to 6% lower ASP of net orders. Cancellations, as a percentage of the beginning backlog, increased 970 basis points to 17.1% from 7.4%.
Quarter-end backlog totaled 5,338 homes, down 30% from a year ago. Potential housing revenues from backlog dipped 25% from the prior-year period’s levels to $3.20 billion amid 8% higher ASP of homes in backlog.
Housing gross margin contracted 80 basis points (bps) year over year to 22.7%. Excluding inventory impairments, warranty adjustments and interest in the cost of sales, the housing gross margin increased 110 bps year over year to 25.9%. Selling, general and administrative expenses — as a percentage of housing revenues — increased 40 bps from the year-ago quarter’s figure to 10%.
Financial Services revenues rose 20.9% year over year to $34.1 million.
Financial Position
MDC had cash and cash equivalents of $417.3 million in the Homebuilding segment and $34.5 million in the Financial Services unit as of Sep 30, 2022. This compares with 2021-end numbers of $485.8 million and $104.8 million, respectively.
Inventories rose to $4.04 billion from $3.76 billion at the 2021-end. Lots controlled of 29,256 at Sep 30 was down 20% year over year. Net cash provided by operations was $172.9 million in the third quarter versus net cash used in operations $98.6 million a year ago.
Q4 Guidance
For fourth-quarter 2022, the company expects home deliveries of between 2,200 and 2,500 units. This indicates a fall from 2,564 units reported in fourth-quarter 2021. The average selling price is likely to be within $570,000-$580,000, indicating a significant rise from $461,000 reported a year ago. Housing gross margin (excluding impairments and warranty adjustments) is anticipated between 20% and 22% compared with 22% reported in the prior-year period.
Zacks Rank & Peer Releases
MDC currently carries a Zacks Rank #5 (Strong Sell).
PulteGroup Inc. (PHM - Free Report) reported unimpressive results in third-quarter 2022. Quarterly earnings and revenues missed their respective Zacks Consensus Estimate thanks to prevailing industry headwinds.
Nonetheless, PHM’s earnings and revenues increased on a year-over-year basis.
Meritage Homes Corporation (MTH - Free Report) reported mixed results for third-quarter 2022, with earnings surpassing the Zacks Consensus Estimate and increasing year over year. Revenues rose from the year-ago quarter’s levels but lagged the consensus mark.
Despite prevailing challenges like interest rate hikes, supply chain issues, Hurricane Ian and market uncertainty, Meritage Homes achieved the highest quarterly home closing revenue and record quarterly earnings.
NVR, Inc. (NVR - Free Report) reported mixed results for third-quarter 2022. This homebuilding and mortgage banking company’s earnings missed the Zacks Consensus Estimate and revenues beat the same.
Shares of NVR increased 5.71% on Oct 26, as the top and the bottom line increased on a year-over-year basis.
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MDC's Earnings Miss Estimates in Q3, Gross Margin Declines
M.D.C. Holdings, Inc. reported lackluster earnings for third-quarter 2022c, which missed the Zacks Consensus Estimate and declined year over year. Revenues topped the consensus estimate and rose year over year.
In a bid to stay competitive in the current market condition, MDC is offering great opportunities for the build-to-order buyers, such as long-term interest rate lock programs and other special incentives.
Shares of this leading homebuilder inched up 0.22% on Oct 27, post earnings release.
MDC's executive chairman, Larry A. Mizel, said, "Interest rate volatility and overall economic uncertainty took a toll on our sales efforts in the third quarter, as we experienced a slowdown in demand coupled with a sharp increase in cancellations. Buyer psychology continued to be adversely affected by the negative news flow surrounding housing market conditions and the overall economy, leading to a disappointing net order result for the quarter. While we believe that the long-term outlook for new home construction is positive and that there is a strong desire to own a home in this country, we expect near-term demand trends to remain challenged until interest rates stabilize."
Earnings & Revenue Discussion
The company reported quarterly earnings of $1.98 per share, which lagged the consensus estimate of $2.24 by 11.6% and fell 0.5% from the year-ago quarter’s figure of $1.99. The downside was due to prevailing softness in housing demand and other industry headwinds.
M.D.C. Holdings, Inc. Price, Consensus and EPS Surprise
M.D.C. Holdings, Inc. price-consensus-eps-surprise-chart | M.D.C. Holdings, Inc. Quote
Total revenues (including Home sale revenues and Financial Services revenues) of $1.44 billion topped the consensus mark of $1.41 billion by 2.6% and increased 10.8% on a year-over-year basis from $1.3 billion reported a year ago.
Segment Details
Homebuilding: Home sale revenues of $1.41 billion increased 12% from the prior-year period’s levels, backed by a 13% higher average selling price or ASP. Units delivered were down 1% from the year-ago level to 2,387 homes. New home deliveries were down in West and Mountain, while East grew 14%.
Gross new orders fell 47% from the prior-year quarter to 1,569 homes and net new orders fell 88% to 299. The value of net orders also declined 88% from the year-ago quarter’s levels to $152.8 million due to 6% lower ASP of net orders. Cancellations, as a percentage of the beginning backlog, increased 970 basis points to 17.1% from 7.4%.
Quarter-end backlog totaled 5,338 homes, down 30% from a year ago. Potential housing revenues from backlog dipped 25% from the prior-year period’s levels to $3.20 billion amid 8% higher ASP of homes in backlog.
Housing gross margin contracted 80 basis points (bps) year over year to 22.7%. Excluding inventory impairments, warranty adjustments and interest in the cost of sales, the housing gross margin increased 110 bps year over year to 25.9%. Selling, general and administrative expenses — as a percentage of housing revenues — increased 40 bps from the year-ago quarter’s figure to 10%.
Financial Services revenues rose 20.9% year over year to $34.1 million.
Financial Position
MDC had cash and cash equivalents of $417.3 million in the Homebuilding segment and $34.5 million in the Financial Services unit as of Sep 30, 2022. This compares with 2021-end numbers of $485.8 million and $104.8 million, respectively.
Inventories rose to $4.04 billion from $3.76 billion at the 2021-end. Lots controlled of 29,256 at Sep 30 was down 20% year over year. Net cash provided by operations was $172.9 million in the third quarter versus net cash used in operations $98.6 million a year ago.
Q4 Guidance
For fourth-quarter 2022, the company expects home deliveries of between 2,200 and 2,500 units. This indicates a fall from 2,564 units reported in fourth-quarter 2021. The average selling price is likely to be within $570,000-$580,000, indicating a significant rise from $461,000 reported a year ago. Housing gross margin (excluding impairments and warranty adjustments) is anticipated between 20% and 22% compared with 22% reported in the prior-year period.
Zacks Rank & Peer Releases
MDC currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PulteGroup Inc. (PHM - Free Report) reported unimpressive results in third-quarter 2022. Quarterly earnings and revenues missed their respective Zacks Consensus Estimate thanks to prevailing industry headwinds.
Nonetheless, PHM’s earnings and revenues increased on a year-over-year basis.
Meritage Homes Corporation (MTH - Free Report) reported mixed results for third-quarter 2022, with earnings surpassing the Zacks Consensus Estimate and increasing year over year. Revenues rose from the year-ago quarter’s levels but lagged the consensus mark.
Despite prevailing challenges like interest rate hikes, supply chain issues, Hurricane Ian and market uncertainty, Meritage Homes achieved the highest quarterly home closing revenue and record quarterly earnings.
NVR, Inc. (NVR - Free Report) reported mixed results for third-quarter 2022. This homebuilding and mortgage banking company’s earnings missed the Zacks Consensus Estimate and revenues beat the same.
Shares of NVR increased 5.71% on Oct 26, as the top and the bottom line increased on a year-over-year basis.