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Ryland Group's 4Q profit soars as home sales rise

Alex Veiga, AP Real Estate Writer

LOS ANGELES (AP) -- Ryland Group Inc. said Tuesday that its net income soared in the fourth quarter, fueled by a 68 percent spike in revenue as the homebuilder sold more homes and benefited from higher sale prices.

The results easily beat Wall Street's expectations, sending shares in the Westlake Village, Calif., company up more than 3 percent in after-market trading.

Ryland, which builds homes in 13 states, said completed sales jumped 59 percent in the October-December quarter versus the last three months of 2011. New home orders grew 64 percent from a year earlier.

The sharp increase in homes sold and contracts for new homes reflects both soft sales trends in the last quarter of 2011 and a budding recovery in housing that got traction last year.

Builders D.R. Horton Inc. and Beazer Homes USA Inc. each reported this week strong sales growth for the last three months of 2012. Several other major builders are scheduled to report earnings later this week.

Stable job gains and low mortgage rates are spurring buyers who were on the sidelines during the recession to return to the housing market. Completed sales of previously occupied homes rose last year to their highest level in five years, while sales of new homes climbed nearly 20 percent to 367,000 last year, the most since 2009.

In addition, a tight supply of homes available for sale in many markets has helped drive home prices higher.

For the three months ended Dec. 31, Ryland reported net income of $28.6 million, or 55 cents per share, compared with net income of $812,000, or 2 cents per share, a year earlier.

The surge in completed home sales helped vault quarterly revenue to $440.1 million, up from $261.4 million in the prior-year period.

Analysts' consensus forecast called for earnings of 49 cents per share on revenue of $406.8 million, according to FactSet.

Faced with stronger demand for its homes, Ryland offered buyers fewer sales incentives and price concessions. That helped drive the builder's average closing price about 6 percent to $270,000 from $255,000.

The company also made more money off each home it sold. Its housing gross profit margin in the quarter was 20 percent, up from 18.1 percent a year earlier.

Ryland also didn't have to deal with as many cancelled sales contracts.

Its average sales contract cancellation rate during the quarter was 17.9 percent, down from 21.4 percent.

All told, the builder ended the quarter with a backlog of 2,391 homes under contract. That's up 61.4 percent from the end of the quarter last year, and represents a dollar value of $663.4 million. Backlog is a potential indicator of future revenue.

Ryland also closed the year with 238 open home communities, an increase of 12.8 percent from the end of 2011.

For all of 2012, Ryland's net income was $40.4 million, or 84 cents per share, compared with a loss of $50.8 million, or $1.14 per share, in 2011. Full-year revenue grew to $1.31 billion from $889.5 million the year before.

The builder's completed sales for 2012 totaled 4,809, a 41 percent increase from its sales in 2011.

Ryland shares ended the regular session up $1.48, or 3.7 percent, at $41.31. The stock gained $1.44, or 3.5 percent, to $42.75 in extended trading. So far this year, Ryland shares are up about 13 percent.