Builder earnings continued today as Taylor Morrison reported fourth-quarter results. Among the highlights:

  • Average community count increased 30% from the prior year quarter to 286 average communities
  • Net sales orders increased over 11% from the prior year quarter to 1,440
  • Home closings increased over 5% from the prior year quarter to 2,068
  • Backlog of homes under contract at the end of the quarter was 2,932 units, with a sales value of $1.4 billion
  • Average price of homes closed was $452,000
  • Average monthly absorption pace per community was 1.7 for the quarter
  • Mortgage operations reported gross profit of $6.9 million on revenue of $14.3 million

"We expect a roughly neutral reaction by the stock today, as while orders were solidly below our estimate and we believe investor expectations, at the same time, we point to TMHC’s 27% year-to-date decline as well as its compelling P/B [price-to-book] valuation of 0.73x, while moreover, we note that earnings per share was in-line with our estimate and the Street," wrote J.P. Morgan's Michael Rehaut.

Looking forward, Rehaut has a neutral reaction to the stock: "Importantly, the company issued 2016 guidance, including average community count between 310-320 versus 259 in 2015 (up 22% YOY), closings up 10-15% versus our 15%E, reported gross margins in the low-to-mid 18% range versus our 18.3%E, SG&A around 10% versus our 9.7%E, income from unconsolidated JVs of $10-$15 million and an effective tax rate of 33-35% versus our 35%E. The company also expects land and development spend at or just below $1 billion in 2016."

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