NVR Shares Decline Despite Q2 Earnings Beat, Margin Falls
NVR, Inc. NVR reported second-quarter 2018 earnings of $49.05 per share, beating the Zacks Consensus Estimate of $46.21 by 6.2%. Earnings increased 39% from the prior-year quarter, primarily owing to a lower tax rate.
Total revenues (Homebuilding & Mortgage Banking fees combined) were $1.79 billion in the quarter, increasing 16% from the prior-year quarter on account of higher housing revenues.
Despite reporting better-than-expected results, share price of NVR dropped more than 8% on Jul 20. The decline might be due to dismal gross margin. In the past six months, the stock has declined 18.9% compared with the industry’s 19.6% fall.
Segment Details
Homebuilding: In the reported quarter, homebuilding revenues increased 16% year over year to $1.75 billion.
New orders jumped 6% to 4,964 homes, driven by higher demand in the housing markets served by NVR. Settlements increased 18% from the year-ago quarter to 4,611 units.
Average settlement price declined 1.7% year over year to $379.6. At the end of the reported quarter, average community count was 480 compared with 491 in the prior-year quarter. The company’s backlog totaled 10,162 homes (as of Jun 30), up 15% from the prior-year quarter. Potential housing revenues from backlog increased 12% to $3.86 billion.
Margins
Homebuilding gross margin contracted 40 basis points to 19.1%.
Selling, general and administrative (SG&A) expenses were $106.5 million compared with $99.1 million in the prior-year quarter.
Mortgage Banking: In the reported quarter, Mortgage banking fees grew 15.9% year over year to $36.8 million. Mortgage totaled $1.2 billion in closed loan production, rising 17% year over year.
NVR, Inc. Price, Consensus and EPS Surprise
NVR, Inc. Price, Consensus and EPS Surprise | NVR, Inc. Quote
Financials
NVR’s cash and cash equivalents for Homebuilding and Mortgage Banking were $417.3 million and $14.2 million, respectively, as of Jun 30, 2018 compared with $645.1 million and $21.7 million on Dec 31, 2017.
Zacks Rank
Currently, NVR carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Upcoming Peer Releases
Meritage Homes Corporation MTH is slated to report quarterly results on July 25. The Zacks Consensus Estimate for earnings is pegged at $1.10 per share, reflecting an increase of 12.2% year over year.
PulteGroup, Inc. PHM is scheduled to release quarterly results on July 26. The Zacks Consensus Estimate for earnings stands at 74 cents, depicting a rise of 57.5% year over year.
D.R. Horton, Inc. DHI is scheduled to report quarterly numbers on July 26. The Zacks Consensus Estimate for earnings is pegged at $1.08 per share, indicating growth of 42.1% year over year.
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