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NVR's Q2 Earnings Surpass Expectations, New Orders Increase

Zacks Equity Research

NVR, Inc. NVR reported second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate. The stock — which was up by just 0.4% on Jul 19 — has rallied 44.4% year to date compared with the SPDR S&P Homebuilders ETF XHB and S&P 500’s gain of 29.1% and 17.2%, respectively.

The country’s one of the leading homebuilding and mortgage banking companies reported earnings of $53.09 per share, beating the consensus mark of $45.15 by 17.6%. Also, the reported figure increased 8.2% from the prior-year quarter.

Total revenues (Homebuilding & Mortgage Banking fees combined) were $1.8 billion in the quarter, up 1% year over year on higher deliveries and prices.

Segment Details

Homebuilding: Revenues from the homebuilding segment were almost flat year over year at $1.76 billion. Settlements increased 2% from the year-ago quarter to 4,720 units. Average settlement price was $372.3k, reflecting an increase of 1.9% year over year.

New orders also increased 6% from the prior-year quarter to 5,239 units. Average sales price of new orders during the reported quarter was $358,600, reflecting a 5% year-over-year decline, 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.

Gross margin in the quarter contracted 20 basis points to 18.9%. Also, income before tax dropped 2% from the year-ago quarter. Selling, general and administrative expenses were $112.2 million, up 5.3% from the prior-year quarter.

Backlog (homes sold but not settled) as of Jun 30, 2019 declined 6% from the year-ago period to 9,530 units and 9% (on a dollar basis) to $3.52 billion.

At the end of the reported quarter, average community count was 470, down from the prior-year level of 480 units.

Mortgage Banking: In the reported quarter, Mortgage banking fees rose 16% year over year to $42.7 million. Moreover, mortgage closed loan production totaled $1.23 billion, increasing 1% year over year.

NVR, Inc. Price, Consensus and EPS Surprise

NVR, Inc. Price, Consensus and EPS Surprise

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

Financials

As of Jun 30, 2019, NVR’s cash and cash equivalents for Homebuilding and Mortgage Banking were $861 million and $21.4 million compared with $688.8 million and $23.1 million, respectively, at 2018-end.

Zacks Rank

Currently, NVR carries a Zacks Rank #2 (Buy). 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 second-quarter fiscal 2019 (ended May 31, 2019), after missing estimates in the preceding quarter. Earnings and revenues increased on a year-over-year basis during the quarter.

KB Home’s KBH earnings and revenues beat expectations in second-quarter fiscal 2019. However, earnings and revenues decreased 10.5% and 7.2% year over year, respectively, in the quarter.

Upcoming Peer Release

PulteGroup, Inc. PHM is scheduled to report second-quarter results on Jul 23. The company’s second-quarter earnings are projected at 82 cents, indicating a 7.9% year-over-year decline.

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