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NVR Q3 Earnings Beat Estimatess, Up Y/Y, New Orders Increase

Zacks Equity Research

NVR, Inc. NVR reported solid results in third-quarter 2019. The company’s earnings not only surpassed the Zacks Consensus Estimate but also improved on a year-over-year basis.

The country’s leading homebuilding and mortgage banking company reported earnings of $56.11 per share, which surpassed the consensus mark of $51.78 by 8.4%. Also, the reported figure increased 16.2% from the prior-year quarter.

Total revenues (Homebuilding & Mortgage Banking fees combined) came in at $1.91 billion during the reported quarter, up 3% year over year on higher deliveries, partially offset by lower selling prices.

NVR, Inc. Price, Consensus and EPS Surprise

NVR, Inc. Price, Consensus and EPS Surprise

NVR, Inc. price-consensus-eps-surprise-chart | NVR, Inc. Quote

Segment Details

Homebuilding: In the reported quarter, Homebuilding segment’s revenues totaled $1.87 billion, up 11% from the year-ago period. Settlements grew 8% year over year to 5,124 units. However, average settlement price was $365.5k, reflecting a decrease of 1.3% year over year.

New orders during the quarter increased 11% from the prior-year period to 4,766 units. However, average sales price of new orders declined 1% from the prior-year quarter to $369,200, mainly due to a continued shift to smaller and lower-priced products. A shift to markets with lower average sales prices added to the woes.

In the quarter under review, gross margin improved 40 basis points to 19%. Also, income before tax increased 10% from the year-ago quarter. Selling, general and administrative expenses were $110 million, up 0.5% from the prior-year quarter.

As of Sep 30, 2019, backlog (homes sold but not settled) declined 6% from the year-ago period to 9,172 units and 7% (on a dollar basis) to $3.4 billion. At the end of the reported quarter, average community count was 473, down from the prior-year level of 479 units.

Mortgage Banking:  Mortgage banking fees fell 12% year over year to $37.9 million due to the timing of loan sales and a decrease in the fair value measurement adjustment. Moreover, mortgage closed loan production totaled $1.37 billion, up 10% year over year.

Financials

As of Sep 30, 2019, NVR had cash and cash equivalents for Homebuilding and Mortgage Banking of $1,068 million and $26.8 million compared with $688.8 million and $23.1 million, respectively, at 2018-end.

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.

Peer Releases

Lennar Corporation LEN reported better-than-expected results in third-quarter fiscal 2019 (ended Aug 31, 2019). The results mainly benefited from a solid resurgence in demand for new homes, depicting a healthy economy and declining borrowing costs.

KB Home KBH reported third-quarter fiscal 2019 results, wherein earnings beat analysts’ expectation but revenues missed the same. The results mainly benefited from continued progress of the Returns-Focused Growth plan, given stellar average community count growth. Although the company’s top and bottom lines declined on a year-over-year basis, it remains upbeat about improvement in fiscal fourth-quarter results.

Upcoming Peer Release

PulteGroup, Inc. PHM is scheduled to report third-quarter results on Oct 22. The company’s third-quarter earnings are projected at 92 cents, indicating a 8.9% year-over-year decline.

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