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Orders Decline at M.D.C., Ryland

M.D.C.'s earnings miss estimates. Ryland beats, but guides lower for the full year.
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M.D.C. Holdings





each reported solid gains in first-quarter earnings Thursday, but both homebuilders posted lower orders.

M.D.C.'s earnings rose to $95.4 million, or $2.08 a share, from $84.6 million, or $1.86 a share, a year earlier. Revenue rose 22% to $1.14 billion from $933.9 million. The earnings missed analysts' estimate of $2.25 a share, though revenue beat Wall Street's target of $1.13 billion.

The Denver-based company received orders for 3,800 homes with a value of $1.36 billion, compared with 4,546 home orders with a value of $1.48 billion in last year's first quarter. M.D.C. ended the quarter with a backlog of 7,134 homes, down from 7,893 a year earlier, while the sales value of the backlog rose 11% to $2.70 billion.

Orders are considered key indicators of future revenue. It takes roughly seven to nine months for orders to convert into revenue, which means the order numbers that builders report now provide transparency for late 2006 and early 2007.

M.D.C. said it received higher orders in all markets except Colorado, Virginia and Texas, but almost all of the markets were hit by an increase in cancellations.

"We are keenly aware that the homebuilding environment has weakened," said CEO and Chairman Larry Mizel in a statement. "Because the level of our success in 2006 will hinge largely on our ability to generate net home orders in this environment over the balance of the year, we are not in a position to predict whether our revenues and earnings for the full year 2006 will exceed our 2005 performance."

Ryland, meanwhile, posted a first-quarter profit that easily topped Wall Street's expectations, but guided lower for the full year. The builder's first-quarter profit rose to $90 million, or $1.86 a share, from $62.7 million, or $1.25 a share, a year earlier. Analysts, on average, expected earnings of $1.86 a share. Revenue jumped to $1.07 billion from $874 million.

Ryland's first-quarter new orders fell 21%, to 4,021 homes from 5,102. On a dollar basis, the orders declined to $1.2 billion from $1.4 billion. The company's backlog at March 31 stood at $2.8 billion, up 2.7% over the 2005 period.

For 2006, Ryland projected earnings of $9.50 a share. In January, the Calabasas, Calif., company said it was comfortable with analysts' 2006 projections at the time, which stood at $10.09. Analysts' most recent forecast called for earnings of $10.02 a share, according to First Call.

Ryland shares recently were up 5 cents to $68.63. Shares of M.D.C. were lower by 80 cents, or 1.3%, to $60.62.