It has been about a month since the last earnings report for M.D.C. Holdings, Inc. . Shares have lost about 6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is M.D.C. Holdings, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
MDC Q4 Earnings, Sales Lag, Up Y/Y on Solid Demand & Pricing
M.D.C. Holdings, Inc. reported tepid results for fourth-quarter 2021. Both the top and bottom lines missed their respective Zacks Consensus Estimate. The company also provided a tepid guidance for deliveries for first-quarter 2022.
Nonetheless, earnings and revenues rose on a year-over-year basis, thanks to favorable demand and pricing trends in many markets served, driven by strong local economies, rising income and favorable demographics. Also, a lack of existing home supply — which fueled the need for new home construction — is likely to persist in the future, supporting a favorable fundamental backdrop for the industry and MDC.
MDC's executive chairman, Larry A. Mizel, said, "The solid demand trends were evident across our geographic footprint, with each of our homebuilding regions posting an absorption rate above third quarter levels. These order results are a testament to the health of the housing market as well as to our dual strategy of adhering to a build-to-order operating model and focusing on the more affordable segments of the market. We believe these demand drivers will continue into the new year, positioning our company for growth in 2022."
On Jan 24, MDC declared a quarterly cash dividend of 50 cents (after adjusting for an 8% stock dividend in March 2021), up 35% from the prior year.
Earnings & Revenue Discussion
The company reported quarterly earnings of $2.21 per share, which lagged the consensus estimate of $2.52 by 12.3% but grew 8.9% from the year-ago figure of $2.03. The upside was owing to a solid improvement in home sale revenues and housing gross margin.
Total revenues of $1.47 billion missed the consensus mark of $1.56 billion by 6.2% but improved 19.6% on a year-over-year basis, backed by solid segmental results.
Segment Details
Homebuilding: Home sale revenues of $1.44 billion increased 21.5% from the prior-year period backed by solid deliveries. Units delivered were up 4% from the year-ago level to 2,663 homes. Average selling price or ASP also grew 17% from a year ago to $539,000. New home deliveries were up across the regions served (barring Mountain).
Net new orders fell 2.3% from the prior-year quarter to 2,645 homes. Yet, the value of net orders rose 9% from the year-ago quarter to $1.43 billion, backed by 12% higher ASP of net orders. Quarter-end backlog totaled 7,640 homes, up 15% from a year ago. Potential housing revenues from backlog also grew 32% from the prior-year period to $4.30 billion.
Housing gross margin registered an improvement of 150 basis points (bps) year over year to 23.5%. Selling, general and administrative expenses — as a percentage of housing revenues — improved 90 bps from the year-ago figure to 9.1%.
Financial Services revenues fell 30.4% year over year to $30.8 million.
Financial Position
MDC had cash and cash equivalents of $485.8 million in the Homebuilding segment and $104.8 million in the Financial Services unit as of Dec 31, 2021. This compares favorably with 2020-end numbers of $411.4 million and $77.3 million, respectively. Inventories rose to $3.76 billion from $2.83 billion at 2020-end. As of Dec 31, 2021, lots controlled were up 29% year over year to 38,080. Net cash used in operations was $121.5 million for the fourth quarter compared with $52.5 million a year ago.
2021 Highlights
Home sale revenues for 2021 came in at $5.10 billion, up 36% from the 2020 level on 22% higher home deliveries. Earnings of $7.83 per share rose 51.5% year over year. Net new orders of 10,967 homes were down 0.4% from 11,012 reported in 2020. Value of net new orders increased 11% to $6.04 billion from $5.46 billion reported a year ago. For 2021, housing gross margin improved 230 bps to 23.1% from 20.8% in 2020. SG&A expenses (as a percentage of home closing revenues) improved 100 bps to 9.7% from 10.7% in 2020.
Guidance
For first-quarter 2022, the company expects home deliveries between 2,000 and 2,300 units. This indicates a fall from 2,178 units reported in first-quarter 2021, considering the mid-point of guided range. The average selling price is likely to be within $550,000-$560,000, indicating a rise from $478,000 reported a year ago. Housing gross margin (assuming no impairments and warranty adjustments) is anticipated to be 25%, suggesting growth from 21.9% reported in the prior-year period.
For 2022, it expects home deliveries between 10,500 and 11,000 units, implying an increase from 9,982 units in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, M.D.C. Holdings, Inc. has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
M.D.C. Holdings, Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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M.D.C. Holdings, Inc. (MDC) Down 6% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for M.D.C. Holdings, Inc. . Shares have lost about 6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is M.D.C. Holdings, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
MDC Q4 Earnings, Sales Lag, Up Y/Y on Solid Demand & Pricing
M.D.C. Holdings, Inc. reported tepid results for fourth-quarter 2021. Both the top and bottom lines missed their respective Zacks Consensus Estimate. The company also provided a tepid guidance for deliveries for first-quarter 2022.
Nonetheless, earnings and revenues rose on a year-over-year basis, thanks to favorable demand and pricing trends in many markets served, driven by strong local economies, rising income and favorable demographics. Also, a lack of existing home supply — which fueled the need for new home construction — is likely to persist in the future, supporting a favorable fundamental backdrop for the industry and MDC.
MDC's executive chairman, Larry A. Mizel, said, "The solid demand trends were evident across our geographic footprint, with each of our homebuilding regions posting an absorption rate above third quarter levels. These order results are a testament to the health of the housing market as well as to our dual strategy of adhering to a build-to-order operating model and focusing on the more affordable segments of the market. We believe these demand drivers will continue into the new year, positioning our company for growth in 2022."
On Jan 24, MDC declared a quarterly cash dividend of 50 cents (after adjusting for an 8% stock dividend in March 2021), up 35% from the prior year.
Earnings & Revenue Discussion
The company reported quarterly earnings of $2.21 per share, which lagged the consensus estimate of $2.52 by 12.3% but grew 8.9% from the year-ago figure of $2.03. The upside was owing to a solid improvement in home sale revenues and housing gross margin.
Total revenues of $1.47 billion missed the consensus mark of $1.56 billion by 6.2% but improved 19.6% on a year-over-year basis, backed by solid segmental results.
Segment Details
Homebuilding: Home sale revenues of $1.44 billion increased 21.5% from the prior-year period backed by solid deliveries. Units delivered were up 4% from the year-ago level to 2,663 homes. Average selling price or ASP also grew 17% from a year ago to $539,000. New home deliveries were up across the regions served (barring Mountain).
Net new orders fell 2.3% from the prior-year quarter to 2,645 homes. Yet, the value of net orders rose 9% from the year-ago quarter to $1.43 billion, backed by 12% higher ASP of net orders. Quarter-end backlog totaled 7,640 homes, up 15% from a year ago. Potential housing revenues from backlog also grew 32% from the prior-year period to $4.30 billion.
Housing gross margin registered an improvement of 150 basis points (bps) year over year to 23.5%. Selling, general and administrative expenses — as a percentage of housing revenues — improved 90 bps from the year-ago figure to 9.1%.
Financial Services revenues fell 30.4% year over year to $30.8 million.
Financial Position
MDC had cash and cash equivalents of $485.8 million in the Homebuilding segment and $104.8 million in the Financial Services unit as of Dec 31, 2021. This compares favorably with 2020-end numbers of $411.4 million and $77.3 million, respectively. Inventories rose to $3.76 billion from $2.83 billion at 2020-end. As of Dec 31, 2021, lots controlled were up 29% year over year to 38,080. Net cash used in operations was $121.5 million for the fourth quarter compared with $52.5 million a year ago.
2021 Highlights
Home sale revenues for 2021 came in at $5.10 billion, up 36% from the 2020 level on 22% higher home deliveries. Earnings of $7.83 per share rose 51.5% year over year. Net new orders of 10,967 homes were down 0.4% from 11,012 reported in 2020. Value of net new orders increased 11% to $6.04 billion from $5.46 billion reported a year ago. For 2021, housing gross margin improved 230 bps to 23.1% from 20.8% in 2020. SG&A expenses (as a percentage of home closing revenues) improved 100 bps to 9.7% from 10.7% in 2020.
Guidance
For first-quarter 2022, the company expects home deliveries between 2,000 and 2,300 units. This indicates a fall from 2,178 units reported in first-quarter 2021, considering the mid-point of guided range. The average selling price is likely to be within $550,000-$560,000, indicating a rise from $478,000 reported a year ago. Housing gross margin (assuming no impairments and warranty adjustments) is anticipated to be 25%, suggesting growth from 21.9% reported in the prior-year period.
For 2022, it expects home deliveries between 10,500 and 11,000 units, implying an increase from 9,982 units in 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
VGM Scores
At this time, M.D.C. Holdings, Inc. has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
M.D.C. Holdings, Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.