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MDC's Richmond American to Acquire Jones' Homebuilding Assets
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A subsidiary of M.D.C. Holdings, Inc. , Richmond American Homes of Tennessee, Inc., inked a deal with The Jones Company of Tennessee, LLC to acquire its homebuilding assets.
The transaction is expected to close by the second quarter-end and is likely to add approximately 10 selling communities, 1,700 controlled lots and 150 units in the backlog to the Richmond American’s operations. The transaction is subject to the approval of the MDC’s board of directors and customary conditions.
David D. Mandarich, MDC's president and CEO, stated, "We are excited to welcome the Jones team into the Richmond American family and look forward to growing our footprint in one of the country's best housing markets. We believe that this transaction, combined with the organic land pipeline we have secured since starting in Nashville about 12 months ago, has the potential to launch Richmond American into a leadership position in the Nashville market."
In 2021, Jones closed more than 370 homes in the Nashville area with an average sales price of $564,000, generating $209 million in revenues.
Strong Housing Market Backdrop
MDC — a Zacks Rank #3 (Hold) company — has been benefiting from robust housing demand, build-to-order process, relentless land acquisitions and efforts to provide affordable homes.
Lower mortgage rates have been driving the U.S. residential market over the past few months. Furthermore, demand for new single-family homes has seen a V-shaped recovery throughout the country and MDC is not an exception. The rising work-from-home trend and fear of future interest rate hikes are prompting many families to choose new and spacious homes, thereby boosting demand.
Recently, Commerce Department came up with solid housing starts and building permits data, increasing jumped 0.3% and 0.4% month over month, respectively. (Read more: U.S. Housing Starts & Permits Rise in March: 4 Top Picks)
However, builders have been facing supply chain disruptions that have pushed prices for building materials higher. Also, a shortage of skilled labor, materials and lots has been making it difficult to increase the pace of construction. In addition to this, sharply rising mortgage rates and higher inflation are taking a hit on purchasing power. Total existing-home sales dipped 2.7% in March from February to a seasonally adjusted annual rate of 5.77 million, per the National Association of Realtors.
Homebuilder also reflected the same in recent builder confidence reading. According to the recently released National Association of Home Builders/Wells Fargo Housing Market Index, homebuilder sentiment declined 2 points to 77 in April, marking the fourth consecutive month of decline.
To mitigate these macro headwinds, MDC and homebuilders like Lennar Corporation (LEN - Free Report) , PulteGroup, Inc. (PHM - Free Report) , D.R. Horton, Inc. (DHI - Free Report) have undertaken various price actions as well as cost-saving moves. These companies are currently observing price-cost neutrality, which will certainly reduce cost pressure on the bottom line.
Image Source: Zacks Investment Research
Although shares of MDC have declined 34% so far this year compared with the Zacks Building Products - Home Builders industry’s 30.1% fall, 2022 earnings estimates of $10.61 indicate 35.5% year-over-year growth. We believe that the recent move will definitely add to the positives in the future.
Discussion of the Above-Mentioned Stocks
Lennar: This well-known homebuilder is benefiting from effective cost control and focus on making its homebuilding platform more efficient, leading to higher operating leverage.
Lennar’s earnings for fiscal 2022 are expected to rise 15.1% year over year to $16.43 per share.
PulteGroup: This Atlanta-based homebuilder has been benefiting from a prudent land investment strategy, focus on entry-level buyers and returning more free cash flow to shareholders. PulteGroup’s annual land acquisition strategies have been resulting in improved volumes, revenues and profitability for quite some time now. The company has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes.
Earnings for 2022 are expected to increase 38.6% year over year.
D.R. Horton: This leading homebuilder currently sports a Zacks Rank #1. This Texas-based prime homebuilder continues to gain from industry-leading market share, a solid acquisition strategy, a well-stocked supply of land, lots, and homes along with affordable product offerings across multiple brands.
D.R. Horton’s earnings are expected to rise 38.7% year over year in fiscal 2022.
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MDC's Richmond American to Acquire Jones' Homebuilding Assets
A subsidiary of M.D.C. Holdings, Inc. , Richmond American Homes of Tennessee, Inc., inked a deal with The Jones Company of Tennessee, LLC to acquire its homebuilding assets.
The transaction is expected to close by the second quarter-end and is likely to add approximately 10 selling communities, 1,700 controlled lots and 150 units in the backlog to the Richmond American’s operations. The transaction is subject to the approval of the MDC’s board of directors and customary conditions.
David D. Mandarich, MDC's president and CEO, stated, "We are excited to welcome the Jones team into the Richmond American family and look forward to growing our footprint in one of the country's best housing markets. We believe that this transaction, combined with the organic land pipeline we have secured since starting in Nashville about 12 months ago, has the potential to launch Richmond American into a leadership position in the Nashville market."
In 2021, Jones closed more than 370 homes in the Nashville area with an average sales price of $564,000, generating $209 million in revenues.
Strong Housing Market Backdrop
MDC — a Zacks Rank #3 (Hold) company — has been benefiting from robust housing demand, build-to-order process, relentless land acquisitions and efforts to provide affordable homes.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lower mortgage rates have been driving the U.S. residential market over the past few months. Furthermore, demand for new single-family homes has seen a V-shaped recovery throughout the country and MDC is not an exception. The rising work-from-home trend and fear of future interest rate hikes are prompting many families to choose new and spacious homes, thereby boosting demand.
Recently, Commerce Department came up with solid housing starts and building permits data, increasing jumped 0.3% and 0.4% month over month, respectively. (Read more: U.S. Housing Starts & Permits Rise in March: 4 Top Picks)
However, builders have been facing supply chain disruptions that have pushed prices for building materials higher. Also, a shortage of skilled labor, materials and lots has been making it difficult to increase the pace of construction. In addition to this, sharply rising mortgage rates and higher inflation are taking a hit on purchasing power. Total existing-home sales dipped 2.7% in March from February to a seasonally adjusted annual rate of 5.77 million, per the National Association of Realtors.
Homebuilder also reflected the same in recent builder confidence reading. According to the recently released National Association of Home Builders/Wells Fargo Housing Market Index, homebuilder sentiment declined 2 points to 77 in April, marking the fourth consecutive month of decline.
To mitigate these macro headwinds, MDC and homebuilders like Lennar Corporation (LEN - Free Report) , PulteGroup, Inc. (PHM - Free Report) , D.R. Horton, Inc. (DHI - Free Report) have undertaken various price actions as well as cost-saving moves. These companies are currently observing price-cost neutrality, which will certainly reduce cost pressure on the bottom line.
Image Source: Zacks Investment Research
Although shares of MDC have declined 34% so far this year compared with the Zacks Building Products - Home Builders industry’s 30.1% fall, 2022 earnings estimates of $10.61 indicate 35.5% year-over-year growth. We believe that the recent move will definitely add to the positives in the future.
Discussion of the Above-Mentioned Stocks
Lennar: This well-known homebuilder is benefiting from effective cost control and focus on making its homebuilding platform more efficient, leading to higher operating leverage.
Lennar’s earnings for fiscal 2022 are expected to rise 15.1% year over year to $16.43 per share.
PulteGroup: This Atlanta-based homebuilder has been benefiting from a prudent land investment strategy, focus on entry-level buyers and returning more free cash flow to shareholders. PulteGroup’s annual land acquisition strategies have been resulting in improved volumes, revenues and profitability for quite some time now. The company has been reaping benefits from the successful execution of strategic initiatives to boost profitability, with a focus on entry-level homes.
Earnings for 2022 are expected to increase 38.6% year over year.
D.R. Horton: This leading homebuilder currently sports a Zacks Rank #1. This Texas-based prime homebuilder continues to gain from industry-leading market share, a solid acquisition strategy, a well-stocked supply of land, lots, and homes along with affordable product offerings across multiple brands.
D.R. Horton’s earnings are expected to rise 38.7% year over year in fiscal 2022.