Earnings Slide at MDC Holdings

The homebuilder reports a 40% drop in orders.
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MDC Holdings

(MDC) - Get Report

said Tuesday that its third-quarter profit tumbled 60%, as the homebuilder continues to wrestle with a competitive U.S. home sales environment plagued by high inventories.

MDC earned $48.7 million, or $1.06 a share, down from $121 million, or $2.62 a share a year earlier. The earnings were well below Thomson First Call's average analyst estimate of $1.35 a share.

Revenue slid to $1.08 billion from $1.17 billion a year earlier. Analysts expected revenue of $1.09 billion.

Homebuilding gross margins fell to 22.7% in the quarter from 28.8% the prior period. Margins declined in every market except Utah and the Delaware Valley, with the biggest decreases in Nevada, Virginia and California.

Selling, general and administrative expenses climbed to 12.9% of home sales revenue in the quarter from 10.4% of sales in the prior period, amid higher commissions and advertising expenses. As well, land option write-off costs rose $7 million year over year.

MDC also recorded a $19.9 million inventory impairment charge primarily related to five projects in California, where the company "experienced a much slower than anticipated home order pace and significantly increased sales incentive requirements."

The company received net orders of 2,120 units, down 40% from the level of 3,551 homes a year earlier.

Shares of MDC recently were up $1.28, or 2.7%, to $49.66.