PUBLICLY OWNED HOME BUILDING COMPANIES continued their long-running winning streak in the third quarter, for the most part posting strong gains in almost every measure of operating performance. At least eight set records for third-quarter earnings. Several also hit new highs in quarterly revenues, deliveries, and/or new orders.

Gross margins also improved for many public builders. Beazer's gross margin for home construction jumped 130 basis points to 20.4 percent, for example. D.R. Horton reported a 270 basis-point improvement to 23.1 percent year over year. Centex added 130 basis points to its operating margin, bringing it to 13.3 percent.

But it wasn't all roses. A number of other builders, such as Standard Pacific and Dominion, suffered gross margin declines as materials costs increased. And quarterly new orders (year over year) fell for some of the group.

Many builders operating in Florida markets suffered delays and losses from the series of hurricanes that slammed the state.

“We realized lower-than-anticipated volumes of sales and closings due to the impact of hurricanes Charley, Frances, and Jeanne,” Avatar reported in its quarterly report. “We estimate that closings of in excess of 100 homes scheduled for 2004 will be delayed until the first quarter of 2005,” and construction of more than 100 homes will also be delayed, the report stated.

The storms delayed delivery of some 300 Standard Pacific homes. WCI suffered some $9.6 million in storm-related property damage. Pulte said the storms delayed the opening of several new communities and, “slowed the pace of signups by an estimated 200 units,” according to its quarterly report.

However, home prices, which were up virtually across the board (by a median 11 percent) resulted in record backlog values for at least eight public builders, fueling optimism for the last quarter and 2005. D.R. Horton's “double-digit sales increase” and “record $4.6 billion backlog” position the company “for a strong start to fiscal year 2005,” stated chairman Donald Horton. And Brookfield Homes president and CEO Ian Cockwell, citing an anticipated year-end backlog of “30 percent of our planned 2005 closings,” expressed “confidence in our ability to deliver continued earnings growth, despite the possibility of slowing housing markets and price escalation.”

Source: Big Builder Research; Company Reports