NVR, Inc., one of the nation’s largest homebuilding and mortgage banking companies, announced that diluted earnings per share for its first quarter ended March 31, 2007 decreased 33% and net income decreased 36% when compared to the 2006 first quarter. Net income for the 2007 first quarter was $84,821,000, $12.96 per diluted share, compared to net income of $132,560,000, $19.48 per diluted share, for the same period of 2006. Consolidated revenues for the first three months of 2007 totaled $1,093,189,000, a 9% decrease from $1,204,655,000 for the comparable 2006 quarter.
Sounds terrible, but the consensus estimates were much worse: $8.81 per share on $921 million of revenue. The stock was up significantly on the news.
Serving one of the markets worst-hit early on by the housing slowdown, it is possible NVR will also see a recovery ahead of other homebuilders:
New orders in the first quarter of 2007 increased 8% to 3,917 units, when compared to 3,633 units in the first quarter of 2006. New orders in the Mid Atlantic and Mid East regions increased 18% and 11%, respectively, when compared to the first quarter of 2006. The Mid Atlantic region experienced an improvement in market conditions at the start of the quarter, however, market conditions slowed noticeably as the quarter progressed. The cancellation rate in the first quarter of 2007 was 16% compared to 17% in the first quarter of 2006 and 20% in the fourth quarter of 2006. The Washington DC cancellation rate in the quarter was 22% compared to 26% in the first quarter of 2006 and 34% in the fourth quarter of 2006.
At any rate, the company appears to be in little jeopardy of facing a crisis. Cash on hand of $555 million is sufficient to cover liabilities due over the next year even if the company doesn’t take in another dime of cash flow.
However, with earnings expected to plummet to $32 per share next year, the multiple looks a little lofty - and the timing a little early - for us to get too excited about it.