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MDC Q2 Earnings & Revenues Beat, Up Y/Y, Gross Margin Rises

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M.D.C. Holdings, Inc. MDC reported impressive second-quarter 2021 results. Both the top and bottom lines topped their respective Zacks Consensus Estimate as well as rose strongly on a year-over-year basis. The upside was mainly driven by robust housing market fundamentals and solid execution despite industry challenges.

MDC's President and CEO, David Mandarich, said, "We continue to see buyers respond well to our home offerings, especially those within our more affordably priced collections. We are keenly aware of the rising cost of home ownership in our markets and strive to provide more affordable new home options for our buyers through our value-engineered, high quality floor plans.”

Earnings & Revenue Discussion

The company came up with quarterly earnings of $2.11 per share, which surpassed the consensus estimate of $1.98 by 6.6% and grew 74.4% from the year-ago figure of $1.21. The upside was owing to strong improvement in home sale revenues and housing gross margin.

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 and EPS Surprise

M.D.C. Holdings, Inc. price-consensus-eps-surprise-chart | M.D.C. Holdings, Inc. Quote

Total revenues of $1.4 billion topped the consensus mark of $1.35 billion by 3.9% and improved 52.3% on year-over-year basis backed by solid segmental results.

Segment Details

Homebuilding: Segment's revenues of $1.37 billion increased 54% from the prior-year period backed by solid deliveries. Units delivered were up 43% from the year-ago level to 2,722 homes. Average selling price or ASP also grew 8% from a year ago to $502,000. Net new home deliveries were up across the regions served.

Net orders increased 14% from the prior-year quarter to 2,714 homes. Value of net orders also rose 40% from the year-ago quarter to $1.47 billion, backed by 14% higher ASP of net orders. Net orders were up in all the regions served (barring Mountain).

Quarter-end backlog totaled 7,678 homes, up 49% from a year ago. Potential housing revenues from backlog also grew 73% from the prior-year period to $4.11 billion on 16% higher ASP.

Housing gross margin registered an improvement of 290 basis points (bps) year over year to 23.1%. Selling, general and administrative expenses — as a percentage of housing revenues — improved 100 bps to 9.4% from the year-ago figure.

Financial Services revenues improved 1.1% year over year to $33.3 million.

Financial Position

MDC had cash and cash equivalents of $638.5 million in the Homebuilding segment and $886 million in the Financial Services unit as of Jun 30, 2021. This compares favorably with 2020-end numbers of $411.4 million and $77.3 million, respectively. Inventories rose to $3.18 billion from $2.83 billion at 2020-end.

At Jun 30, 2021, lots controlled were up 37% year over year to 34,400.

Net cash provided by operations was $70 million for the second quarter compared with $92.9 million a year ago.

Guidance

For third-quarter 2021, the company expects home deliveries between 2,500 and 2,700 units. Average selling price is likely to be within $510,000-$520,000. Housing gross margin (excluding impairments and warranty adjustments) is anticipated to be 23.5%.

For 2021, it expects home deliveries between 10,000 and 11,000 units. Active subdivision count is expected to grow 10% year over year.

Zacks Rank

MDC — which shares space with Lennar Corporation LEN, KB Home KBH and NVR, Inc. NVR in the Building Products - Home Builders industry — currently carries a Zacks Rank #3 (Hold).

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


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