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NVR Q1 Earnings Top, Revenues Down Y/Y on Sales Cancellation

Zacks Equity Research

NVR, Inc.'s NVR first-quarter 2020 earnings topped the Zacks Consensus Estimate. The company noted that the coronavirus significantly impacted all facets of the business. It remains concerned about its future operational and financial performance due to uncertainty regarding the extent and timing of disruption to the business from COVID-19.  

In the quarter under review, the company reported earnings of $44.96 per share, which surpassed the consensus mark of $42.01 by 7%. However, the reported figure declined 6% from the prior-year figure.

Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $1.58 billion during the reported quarter. The figure declined 6% on a year-over-year basis due to increase in sales cancellations during March, thanks to the impact of the COVID-19 pandemic.

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: Revenues in the segment came in at $1.56 billion, down 5.3% from the year-ago level. Cancellation rate was 21% in the quarter compared with 14% in the year-ago period. Settlements fell 6% year over year to 4,230 units.

New orders during the quarter fell 2% from the prior year to 5,015 units. However, average sales price of new orders inched up 1% from the prior-year quarter to $372,300.

As of Mar 31, 2020, backlog (homes sold but not settled) was flat with the year-ago quarter’s 9,018 units and $3.44 billion on a dollar basis. The backlog includes 1,178 units in Pennsylvania and New York, where governments have currently put some restrictions on residential construction. Notably, the company believes that this backlog may experience a higher level of cancellations due to the company’s inability to deliver these units on time.

Gross margin contracted 170 basis points (bps) to 16.8%. The downside was mainly due to contract land deposit impairments of approximately $36,400,000, or 234 bps, as a percentage of revenues.

Mortgage Banking: Mortgage banking fees decreased 38.8% year over year to $26.8 million. Moreover, mortgage closed loan production totaled $1.13 billion, down 1% year over year due to reduction in fair value of mortgage servicing rights as a result of disruptions in the economy.

Financials

At the end of the first quarter, NVR had cash and cash equivalents for Homebuilding and Mortgage Banking of $1,078.6 million and $13.4 million compared with $1,110.9 million and $29.4 million, respectively, at 2019-end.

Zacks Rank & Peer Releases

Currently, NVR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KB Home KBH reported impressive results in first-quarter fiscal 2020 (ended Feb 29, 2020). Earnings and revenues topped the respective Zacks Consensus Estimate, and registered notable improvement on a year-over-year basis.

Lennar Corporation LEN reported solid results in first-quarter fiscal 2020 (ended Feb 29, 2020). This marks the company’s fourth consecutive quarter of an earnings beat. The results mainly benefited from solid demand for new homes, depicting healthy housing market fundamentals.

PulteGroup Inc. PHM reported first-quarter 2020 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same. Higher demand owing to favorable housing dynamics in most part of the quarter, backed by lower interest rates and improved affordability, had a positive impact on PulteGroup’s performance.

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