Ryland Beats Expectations on Revenue, EPS; Misses on Orders

The builder earnings parade continued today with Ryland reporting this morning. 

The company beat estimates on EPS and revenues and reaction to the report was generally positive. J.P. Morgan’s Michael Rehaut said EPS was above his estimates, orders were below, and gross margins were in line. UBS’s Susan Maklari called the results “impressive.” 

“The outperformance was driven by home building revenue growth of 13% (+7% in units and +5% in ASP) that was well ahead of our 7% forecast (+4% in units and +3% in ASP) adding ~$0.04 to the quarter; better-than-expected results in its financial services business also contributed ~$0.04; and a lower tax rate versus our 38% estimate added to EPS by ~$0.03,” she wrote.

Evercore ISI's Stephen East wasn't as impressed with Ryland's results though. "Ryland's headline number is solid, but the key metrics underlying are disappointing," he wrote. "Exiting the first quarter, Ryland was one of four builders that essentially stated the gross margins would build through the year, with Ryland specifically getting back to flat gorss margins for the full year. This quarter's ~70 bps sequential increase implies very strong second half margins (22%+) that likely cannot be hit."  

With the Stanpac merger expected to close in the fall, the integration of the two companies will take center stage in the coming quarters.

“Regarding the announced merger of equals between Ryland and Standard Pacific, the conservative nature of both these management teams leaves us feeling comfortable about their continued focus on profitability and driving long term shareholder value,” she wrote. “We'd note that Ryland has completed numerous smaller acquisitions as the recovery has taken hold, giving it experience in successfully integrating the operations of two entities.”

Here are some other highlights from the company’s earnings release: