“The rise in orders was led by an 18% increase in average community count, below our 21% estimate, partially offset by a 7% decline in absorption [sales pace[, below our +1% estimate,” wrote J.P. Morgan’s Michael Rehaut.
Compared to the quarter ending March 31, 2014, Ryland, like most builders, saw key indicators increase. Sales incentives and concessions comprised 7.6% of housing revenue versus 6.4% last year; revenues rose 5.7% to $517.4; backlog rose 6%, average closing price increased 4.9% to $343,000, and active communities increased 14.5% to 340 communities.
Orders in the West, North, and Southeast rose 19%, 16%, and 9%, respectively. Texas, plagued by tumbling energy prices, fell 6%.
While the results were below Rehaut’s estimates, he sees the company producing good earnings-per-share growth in 2016 based on its “above average geographic diversification and its historically balanced approach towards capital allocation.”
As it integrates its acquisitions of the past couple of years, UBS’s Susan Maklari is confident Ryland will grow orders at an accelerated rate.
“We continue to believe Ryland is well positioned to grow EPS at an accelerated pace, reflecting our outlook for substantial community count growth, as the company leverages recent acquisitions and absorptions returning to more normal levels in time,” Maklari said in a note.