“We were impressed by the results this quarter and believe this augurs well for the company's outlook, as management continues to successfully execute on its longer-term targets,” said UBS’ Susan Maklari in a research note.
Though Beazer reported a net loss from continuing operations of $2.1 million for the quarter (compared with a net loss of $8.2 million last year) and its margins fell 40 basis points sequentially to 18.3%, its new home orders grew 22.2% with an average active community count that was 14.3% higher than a year ago. Its absorption rates hit an all-time high of 3.5 sales per community per month for the quarter and its average selling price from closings increased 12.3%. At the end of the quarter, it’s backlog consisted of 2,533 homes with a value of $814.1 million, up 27.8% versus last year.
“We are encouraged by the solid start to the spring selling season,” said Allan Merrill, CEO of Beazer, in an earnings release. “Driven by job growth, strong affordability, and low inventory levels, the selling environment during our fiscal second quarter reflected an improvement in homebuyer demand. With our substantially larger backlog, stable gross margins and fixed cost leverage, we expect to achieve a $20 million improvement in Adjusted EBITDA for fiscal 2015 versus last year, excluding certain unexpected warranty and litigation settlement costs.”
Beazer’s order growth of 22% (with 30% coming from the West Region) beat UBS’s expectations of 7%. “This growth was driven by a 14% year-over-year increase in average communities, which resulted in a 7% gain in absorptions,” Maklari said in her research note. “We would also note the cancellation rate declined 270 basis points year over year to 17%. In turn, the unit backlog now represents nearly five months of visibility based on our forward estimates. We expect meaningful order growth for the remainder of 2015, as the benefits from the company's increased land spend over the last two years continue to materialize.”
In fact, Maklari sees a nice story brewing at Beazer. “We continue to believe the turnaround underway at Beazer remains one of the best themes in the homebuilding space,” she said in the note.