For most home building analysts, the big upside to M.D.C. Holdings' second quarter results, released Thursday morning, was that orders were better than Wall Street expected. Orders grew year over year by 5% on a community count growth of 31%. The growth boosted backlog up 28% from the same period in 2010, creating some optimism about the second half of 2011 for the company. But the positive order trend wasn't enough for analysts to overlook habitual balance sheet weaknesses that contributed to a significant widening of the company's loss to $28 million, or ($0.60) per share, from 3.7 million loss during the same quarter last year.
Last week, D.R. Horton, Meritage, M/I Homes, PulteGroup, Ryland, and Standard Pacific all released results for the most recent quarter. There were hallmarks of a housing industry still making baby steps toward a recovery, but results to date have been largely better than many Wall Street analysts had expected. Although it's too early to call it a wrap on earnings season--M.D.C. Holding reports later this week, and Beazer Homes reports next week--a few themes have already emerged from the latest wave of public builder 10-Q filings.
With NVR's weak order report Thursday kicking off the next wave of builder earnings results, Wall Street analysts' hopes for a stronger second quarter performance for the group fall, as does the likelihood that many of the public builder set will end up being profitable for the year.
While most midsized home builders have a tangible need for new capital to reload their operations, few are able to find good capital partners in today's market given all the uncertainties around buyer demand, land values, and even the balance sheet. But the odds of connecting with a capital source increase dramatically for those who have strong footholds in better markets, have a cash-flow friendly multifamily operation within their corporate umbrella; and have a squeaky clean balance sheet.
While KB Home's fiscal 2Q2011 results showed
