“The earnings beat was primarily driven by stronger-than-expected gross margin (29.1% adjusted versus our 28.0% estimate) as well as higher backlog conversion,” wrote Raymond James’ Buck Horne in a report. “New order growth of +54% year over year was almost precisely in line with our estimate.”
Here are some highlights from WCI’s release:
- New orders of 300, up 53.8% with contract value of new orders of $128.6 million, up 37.4%.
- Quarter-end active selling neighborhood count of 45, up 60.7%.
- Deliveries of 243, up 69.9%.
- Average selling price per home delivered of $476,000, up 11.7%.
- Backlog units totaling 627, up 44.8% with backlog contract value of $294.1 million, up 27.9%.
- Revenues from homes delivered of $115.6 million, up 89.8%.
- Approximately 13,500 owned or controlled home sites, up 30.3%
WCI’s average sales price fell, but Horne says that’s explainable. “Order average sales prices fell 11% year over year, but we believe this may be mix-driven due to the opening of some lower price point communities,” he wrote.
Analysts say WCI’s balance is strong as its cash rose $3 million sequentially to $162 million and net debt-to-cap fell 90 basis points sequentially to 16.6%. That puts it in a good position to pick up lots.
“WCI acquired another 1,000 lots during the quarter (700 more than sold), further expanding its land holdings in Florida,” Horne wrote. “WCI is well situated to continue its explosive growth trajectory, and its balance sheet remains nimble with leverage of only 19% net debt/capitalization.”
And at this point in the cycle (unlike, say, 2008), having a one-state focus on Florida is an asset for WCI.
“As D.R. Horton noted yesterday, Florida remains one of the best home building markets in the country, and we believe WCI is very well positioned with one of the best positioned land portfolios in the Sunshine state,” Horne wrote.
J.P. Morgan’s Michael Rehaut also notes WCI has a number of advantages going forward.
“Overall, we continue to rate WCIC neutral, as we believe its relative valuation properly reflects its attractive fundamental profile, featuring industry leading gross margins, a long, attractive land position, and a less interest rate sensitive buyer, which supports our outlook for strong order growth acceleration in 2015 and beyond,” he wrote.