Why Is M.D.C. Holdings, Inc. (MDC) Down 5.4% Since Last Earnings Report?

·5 min read

It has been about a month since the last earnings report for M.D.C. Holdings, Inc. (MDC). Shares have lost about 5.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is M.D.C. Holdings, Inc. due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

MDC's Q4 Earnings Miss, Revenues Beat, Gross Margin Declines

M.D.C. Holdings, Inc. reported mixed results for fourth-quarter 2022. Its earnings missed the Zacks Consensus Estimate and declined year over year due to prevailing inflationary woes.

Revenues topped the consensus estimate and rose year over year.

MDC noted that it experienced a rebound in order activity in December 2022, backed by an aggressive approach to pricing and incentives.

Earnings & Revenue Discussion

The company reported quarterly earnings of $1.08 per share, which lagged the consensus estimate of $1.53 by 29.4% and fell 51% from the year-ago quarter’s figure of $2.21. The downside was due to prevailing softness in housing demand and other industry headwinds.

Total revenues (including Home sale revenues and Financial Services revenues) of $1.52 billion topped the consensus mark of $1.34 billion by 13.2% and increased 3.7% on a year-over-year basis from $1.47 billion reported a year ago.

Segment Details

Homebuilding: Home sale revenues of $1.49 billion increased 4% from the prior-year period’s levels, backed by an 8% increase in average selling price or ASP. Units delivered were down 4% from the year-ago level to 2,554 homes. The West and Mountain regions saw a decrease in new home deliveries, while the East grew by 3.4%.

Gross new orders fell 55% from the prior-year quarter to 1,502 homes and net new orders fell 93% to 190 units. The value of net orders also declined 95% from the year-ago quarter’s levels to $74.4 million due to 28% lower ASP of net orders. Cancellations, as a percentage of the beginning backlog, increased 1,590 basis points to 24.6% from 8.7%. The monthly absorption rate was also down 94% year over year.

Quarter-end backlog totaled 2,974 homes, down 61% from a year ago. Potential housing revenues from backlog plunged 59% from the prior-year period’s levels to $1.75 billion amid a 5% higher ASP.

Housing gross margin contracted 850 basis points (bps) year over year to 15%. Selling, general and administrative expenses — as a percentage of housing revenues — decreased 20 bps from the year-ago quarter’s figure to 8.9%.

Financial Services revenues rose 4.9% year over year to $32.3 million.

2022 Highlights

For the year, the company reported earnings of $7.67 per share, down 2% from its 2021 level of $7.83. Home sale revenues rose 9% to $5.59 billion from $5.10 billion reported in 2021 on the back of strong ASP, partially offset by 3% lower deliveries.

Gross margins declined 70 bps to 22.4% and SG&A improved 10 bps year over year.

Balance Sheet Position

MDC had cash and cash equivalents of $696.1 million in the Homebuilding segment and $17.9 million in the Financial Services unit as of Dec 31, 2022. This compares with 2021-end numbers of $485.8 million and $104.8 million, respectively.

Inventories declined to $3.52 billion from $3.76 billion at the 2021-end. Lots owned and optioned of 25,302 at 2022-end was down by 34% from 38,080 at 2021-end. Debt to capital ratio was 32.6% at 2022-end versus 36.5% at 2021-end.

Net cash provided by operations was $561.7 million in the fourth quarter versus net cash used in operations of $121.5 million a year ago.

Q1 2023 Guidance

For first-quarter 2023, the company expects home deliveries between 1,500 and 1,600 units. This indicates a fall from 2,233 units reported in first-quarter 2022. The average selling price is likely to be within $550,000-$560,000, compared with $556,000 reported a year ago. Housing gross margin (assuming no impairments or warranty adjustments) is anticipated between 18% and 19% compared with 25.7% reported in the prior-year period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -26.85% due to these changes.

VGM Scores

At this time, M.D.C. Holdings, Inc. has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, M.D.C. Holdings, Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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