Update: LGI Homes Q2 Earnings

Aug.12.14 | About: LGI Homes, (LGIH)

Summary

LGI Homes reported Q2 revenue and earnings significantly above analyst consensus and slightly above my own expectations.

The company raised full-year EPS guidance by $0.08 at mid-point of the guidance range.

I am reiterating my $34 price target.

LGI Homes (NASDAQ:LGIH) reported Q2 earnings and revenue that blew past analyst estimates. It was indeed a blowout quarter, as I hinted that it should be in my previous article. Q2 revenue was up 76.6% on a pro-forma basis to $106.4 million. This was $16 million ahead of analyst estimates and $1.4 million ahead of my expectations at mid-point of the range. Earnings per share was $0.43 which was at the top end of my range of $0.39 to $0.43 and $0.10 ahead of analyst estimates.

The average home sales price increased 9.7% Y/Y to $160,744, while the number of active selling communities at the end of Q2 was 31, as opposed to 18 at the end of Q2 2013. As a result of better-than-expected execution in the first half of the year, the company raised full-year EPS guidance from the previous range of $1.22 to $1.30 to a new range of $1.30 to $1.38.

Overall, it was a great quarter for LGI Homes. However, this report was just slightly above my estimates, so I am reiterating my $34 price target. On the other hand, analyst estimates and price targets are bound to move up in the next couple of days or weeks, since they were clearly out of sync with LGI's execution in Q2, since the number of home closings was readily available at the beginning of every month. On the other hand, there is one reason to be concerned, and that is the July home closings growth, which was just 13% over last year's and represents a sharp slowdown when compared to previous months. This does not constitute a trend, and we should wait for the August numbers in order to get a sense of the trend in the second part of the year.

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