Taylor Morrison is poised for growth in 2024 and 2025. Efforts on business operations, including cycle time improvements, cost reductions, and product diversification, have positioned the home builder to capture growth opportunities moving forward, according to chairman and CEO Sheryl Palmer.

“Our strategic plan since becoming a public company over 10 years ago has been focused on building scale, diversification, and operating efficiency to deliver superior performance for our shareholders. The next leg of our strategic journey is focused on accretive growth,” Palmer told investors during Taylor Morrison’s fourth quarter earnings call.

“We believe the strength of our core land portfolio, financial health of our targeted consumers, and experienced teams will allow us to navigate the uncertainties that arise, while our healthy inventory levels, improving cycle times, and compelling sales and finance tools will allow us to meet our customers’ needs,” Palmer continued.

Taylor Morrison closed 11,495 homes in 2023, generating revenues of $7.2 billion. Palmer said the builder is targeting 12,000 closings in 2024 followed by 10% closings growth “in 2025 and thereafter.”

“Our top priority as we move ahead is reaccelerating our growth now that we believe that we have firmly established the operational efficiency required for outsized market share gains,” she said. “Our $1.8 billion land investment in 2023 was focused on supporting these growth aspirations, and with one of the strongest balance sheets in our company’s history, we are well positioned to continue investing with an accretive, disciplined approach in 2024 with an initial planned land spend in the range of $2.3 billion to $2.5 billion.”

In the fourth quarter, Taylor Morrison invested $313 million in land acquisition and $224 million in land development; of the $1.8 billion invested in land for the full fiscal year, the split was roughly even between acquisition and development. Of the land spend projected for 2024, Erik Heuser, executive vice president and chief corporate operations officer, said approximately 40% will be allocated toward land development.

Palmer and Heuser highlighted Taylor Morrison’s pivot away from acquiring finished lots in favor of self-developing land. Finished lots as a percentage of total acquisitions have declined to 12% over the last two years from 35% several years ago; in the same period, the builder’s underwritten monthly sales pace expectations have increased by 30%, and community sizes have increased by 50%.

“We believe this evolution toward larger, more efficient [land outlets] is an important driver of our long-term returns,” Palmer said. “It also limits our exposure to the limited capacity of third-party land developers and improves our long-term planning visibility.”

Buoyed by the strategic shifts in land investment decisions, Taylor Morrison is targeting monthly sales pace goals in the low 3 range in 2024. In 2023, the builder achieved a monthly sales absorption pace of 2.8 homes per community.

“We strongly believe that our diversification across buyer groups ranging from entry-level, move-up, and resort lifestyle combined with our emphasis on high-quality community locations are critical differentiators that enhance our bottom-line potential, growth opportunities, and risk mitigation throughout housing’s inevitable ebbs and flows, as demonstrated with our results through a volatile fourth quarter,” added Palmer.

Quarterly Results

In the fourth quarter, net sales orders increased 30% year over year to 2,361, driven by a strong acceleration in December activity above historical norms. For the full fiscal year, net sales orders increased 14% to 10,830 homes. Sales orders in the fourth quarter were comprised of 42% from move-up buyers, 34% from entry-level buyers, and 24% from lifestyle resort buyers. Approximately 56% of sales in the fourth quarter were spec homes, according to Palmer.

Palmer said the “healthy trends” experienced as the quarter progressed allowed Taylor Morrison to raise base pricing in nearly 60% of its communities.

Home closings revenue declined 19% to $1.9 billion, driven by a 16% in home closings to 3,190 in the quarter. Cancellation rates normalized, declining to 11.6% of gross orders from 24.% a year ago. While closings decreased on a year-over-year basis, chief financial officer Curt VanHyfte said closings exceeded expectations due to backlog conversions that benefited from improvements in construction cycle times.

“Our cycle times improved by another four weeks sequentially and 10 weeks year over year, aided by normalization in the supply chain and our team’s focus on operational efficiency,” VanHyfte said. “We are targeting another four to five weeks of cycle improvement in 2024.”

Taylor Morrison delivered fourth quarter adjusted profit of $223 million, or $2.05 per share, besting Wall Street projections for the quarter. For the full year, the builder reported adjusted net income of $830 million, or $7.54 per share, compared with $1.09 billion, or $9.35 per share, in 2022.

Spring Selling Preparation

Taylor Morrison ended the fiscal year with 5,289 homes in backlog and ramped up its sales pace in expectations of the spring selling season. The company started approximately 2,900 homes in the quarter and had 7,687 homes in production at the end of the fiscal fourth quarter. Of the homes in production, 41% were spec homes. VanHyfte said Taylor Morrison's spec inventory was 40% higher than in 2022 to meet buyer demand in the coming months.

“With a concentrated focus on outsized growth in the years ahead, we have never been better equipped operationally to take advantage of the opportunities across our price points and geographies to serve our customers and create value for all of our stakeholders,” Palmer said.

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