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MDC's Q4 Earnings & Revenues Beat, Net New Orders Surge 697%

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M.D.C. Holdings, Inc. reported better-than-expected results for fourth-quarter 2023. Its earnings topped the Zacks Consensus Estimate and increased year over year.

Revenues surpassed the consensus estimate but declined year over year. Following the results, shares of this homebuilding company inched up 0.1% on Jan 30.

MDC’s uptrend can be attributed to the current new home market, which continues to benefit from the lack of existing home supply. The company witnessed notable improvements in its net new orders. This was driven by a significant decline in cancellations and its use of financing incentives aimed at reducing the negative impact of higher mortgage rates for its buyers.

Investors should note that MDC will no longer hold its fourth-quarter 2023 earnings conference call, as previously announced, as it has signed a definitive agreement to be acquired by a wholly-owned subsidiary of Sekisui House in an all-cash transaction, with an equity value of $4.9 billion. (Read more: MDC to be Acquired by Sekisui House for $4.9B, Stock Gains)

Earnings & Revenue Discussion

The company reported quarterly earnings of $1.56 per share, which topped the consensus estimate of $1.44 by 8.3% and increased 44.4% from the year-ago quarter’s figure of $1.08.

M.D.C. Holdings, Inc. Price, Consensus and EPS Surprise

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 $1.35 billion topped the consensus mark of $1.29 billion by 4.1% but declined 11.4% on a year-over-year basis from $1.52 billion reported a year ago.

Segment Details

Homebuilding: Home sale revenues of $1.31 billion decreased 11.9% from the prior year’s levels due to a 6% lower average selling price (“ASP”) and lower unit deliveries by 154 units. Homebuilding revenues topped our model’s prediction of $1.06 billion or a year-over-year decline of 24.7%. Units delivered were down 6% from the year-ago level to 2,400 homes.

Net new orders grew by a whopping 697% year over year to 1,515 units, driven by a 660% increase in the monthly sales absorption pace of 2.17 homes per community. The value of net orders increased 996% from the year-ago quarter’s levels to $816.2 million, backed by a 38% increase in ASP.

At the end of the fourth quarter, the backlog totaled 1,890 homes, down 36% from a year ago. Potential housing revenues from backlog plunged 34% from the prior-year period’s levels to $1.16 billion, despite a 4% higher ASP.

Housing gross margin expanded 370 basis points (bps) year over year to 18.7%. Selling, general and administrative expenses — as a percentage of housing revenues — increased 80 bps from the year-ago quarter’s figure to 9.7%.

Financial Services: The segment's revenues rose 13.7% year over year to $36.7 million.

2023 Highlights

For the year, the company reported earnings of $5.29 per share, down 31% from its 2022 level of $7.67. Home sale revenues declined 19.1% to $4.52 billion from $5.59 billion reported in 2022 on the back of strong ASP, partially offset by 3% lower deliveries. Financial Services’ revenues were down 6.9% year over year to $122.6 million.

Balance Sheet & Cash Flow

MDC had cash and cash equivalents of $1.48 billion in the Homebuilding segment and $163.8 million in the Financial Services unit as of Dec 31, 2023. This compares with 2022-end numbers of $696.1 million and $17.9 million, respectively.

Total inventories at 2023-end declined to $3.3 billion from $3.52 billion at 2022-end. Lots owned and optioned of 22,415 at 2023-end were down 11% from 25,302 at 2022-end.

Net cash provided by operating activities was $561.6 million in 2023 compared with $905.6 million a year ago.

Zacks Rank & Peer Releases

MDC currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PulteGroup Inc. (PHM - Free Report) reported mixed results for fourth-quarter 2023, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Both metrics decreased year over year.

Nonetheless, during the latter part of the fourth quarter, PulteGroup observed a notable surge in buyer activity, mainly attributed to declining interest rates. December emerged as the quarter's peak sales month. With the anticipation of sustained lower interest rates in 2024, the company remains optimistic that the enhanced affordability landscape will continue to attract prospective buyers.

D.R. Horton, Inc. (DHI - Free Report) reported first-quarter fiscal 2024 (ended Dec 31, 2023) results, wherein earnings missed the Zacks Consensus Estimate but revenues surpassed the same.

DHI reported adjusted earnings of $2.82 per share for the fiscal first quarter, which missed the Zacks Consensus Estimate of $2.88 by 2.1% but improved 2% from the year-ago figure of $2.76. Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $7.73 billion, up 6.5% year over year. The reported figure topped the consensus mark of $7.72 billion by 1.4%.

KB Home (KBH - Free Report) reported better-than-expected results for fourth-quarter fiscal 2023 (ended Nov 30, 2023). Both earnings and revenues beat the Zacks Consensus Estimate. With this, the company’s earnings and revenues surpassed the consensus mark in four consecutive quarters.

Looking forward to the first quarter and the entirety of 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility, and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.

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