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NVR (NVR) Up 10.9% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for NVR (NVR - Free Report) . Shares have added about 10.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NVR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
NVR Earnings Surpass Estimates in Q3, Margin Woes Linger
NVR, one of the country’s leading homebuilding and mortgage banking companies, reported third-quarter 2018 earnings of $48.28 per share, beating the Zacks Consensus Estimate of $47.64 by 1.3%. Also, earnings increased 27% from the prior-year quarter, primarily owing to reduction in effective tax rate.
Total revenues (Homebuilding & Mortgage Banking fees combined) were $1.85 billion in the quarter, up 11% year over year on higher homebuilding and mortgage revenues.
Segment Details
Homebuilding: In the reported quarter, homebuilding revenues increased 11% year over year to approximately $1.81 billion.
New orders jumped 2% to 4,302 units, driven by higher demand in the housing markets served by NVR. Settlements increased 14% from the year-ago quarter to 4,754 units.
Average settlement price declined 3.2% year over year to $380,500, along with the decline of 2% in average new order price amounting to $374,000. At the end of the reported quarter, average community count was 479, in line with the prior-year quarter. The company's backlog increased 10% year over year to 9,710 units, as of Sep 30, 2018.
Margins
In the third quarter of 2018, gross profit margin contracted 130 basis points to 18.6% and income before tax decreased 1% to $224 million. The decline was due to the negative impact of an impairment charge of $7.4 million to one of the company's joint venture investments. Selling, general and administrative (SG&A) expenses were $109.4 million compared with $95.6 million in the prior-year quarter. SG&A (as a percentage of homebuilding revenues) stood at 6%.
Mortgage Banking: In the reported quarter, Mortgage banking fees rose 26% year over year to $43.1 million. Mortgage totaled $1.2 billion in closed loan production, marking an increase of 12% year over year.
Financials
NVR’s cash and cash equivalents for Homebuilding and Mortgage Banking were $598.8 million and $11.1 million, respectively, as of Sep 30, 2018, compared with $645.1 million and $21.7 million as of Dec 31, 2017.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -8.22% due to these changes.
VGM Scores
Currently, NVR has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
NVR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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NVR (NVR) Up 10.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for NVR (NVR - Free Report) . Shares have added about 10.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is NVR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
NVR Earnings Surpass Estimates in Q3, Margin Woes Linger
NVR, one of the country’s leading homebuilding and mortgage banking companies, reported third-quarter 2018 earnings of $48.28 per share, beating the Zacks Consensus Estimate of $47.64 by 1.3%. Also, earnings increased 27% from the prior-year quarter, primarily owing to reduction in effective tax rate.
Total revenues (Homebuilding & Mortgage Banking fees combined) were $1.85 billion in the quarter, up 11% year over year on higher homebuilding and mortgage revenues.
Segment Details
Homebuilding: In the reported quarter, homebuilding revenues increased 11% year over year to approximately $1.81 billion.
New orders jumped 2% to 4,302 units, driven by higher demand in the housing markets served by NVR. Settlements increased 14% from the year-ago quarter to 4,754 units.
Average settlement price declined 3.2% year over year to $380,500, along with the decline of 2% in average new order price amounting to $374,000. At the end of the reported quarter, average community count was 479, in line with the prior-year quarter. The company's backlog increased 10% year over year to 9,710 units, as of Sep 30, 2018.
Margins
In the third quarter of 2018, gross profit margin contracted 130 basis points to 18.6% and income before tax decreased 1% to $224 million. The decline was due to the negative impact of an impairment charge of $7.4 million to one of the company's joint venture investments. Selling, general and administrative (SG&A) expenses were $109.4 million compared with $95.6 million in the prior-year quarter. SG&A (as a percentage of homebuilding revenues) stood at 6%.
Mortgage Banking: In the reported quarter, Mortgage banking fees rose 26% year over year to $43.1 million. Mortgage totaled $1.2 billion in closed loan production, marking an increase of 12% year over year.
Financials
NVR’s cash and cash equivalents for Homebuilding and Mortgage Banking were $598.8 million and $11.1 million, respectively, as of Sep 30, 2018, compared with $645.1 million and $21.7 million as of Dec 31, 2017.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -8.22% due to these changes.
VGM Scores
Currently, NVR has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
NVR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.