LGI Homes (LGIH) will report first quarter results tomorrow morning. Management will host a conference call at 12:30 PM.
LGI Homes is a $2 bln homebuilder based outside of The Woodlands, Texas. The company had 88 active selling communities last quarter, mostly in the Southern and Western US. LGI's growth model targets first time home buyers at the entry level market. The company builds spec homes exclusively, with nothing built to order.
One month ago, the company preannounced first quarter home closings down 1.3% to 1,228. This morning, LGI Homes reported April home closings grew 1% yr/yr to 612.
LGI Homes missed estimates on the top and bottom lines for the first time since its IPO last quarter. Fourth quarter earnings grew 20% yr/yr. Home sales revenue grew 5% as closings increased 0.4% and the average selling price (ASP) grew 4.5% to $230K while gross margins were flat at 24.4%. Forward looking net orders fell 5%.
Analysts expect first quarter earnings down 17% with revenue up 3%.
Last quarter, LGI guided for $7.00-8.00 in EPS for the year, 6,900-7,800 closings (+6-20%) at a $235-245K average selling price (+4%) with a 23.5-25.5% gross margin (down 80 bps yr/yr at midpoint). Home closings are expected to double that of 2015 levels.
Management is likely to discuss improving demand trends.
LGI Homes trades at 10x earnings estimates and 2.4x book value. The average home builder trades at 10x EPS and 1.5x book value.
The stock is up 57% year-to-date versus a 28% gain in the iShares US Home Construction ETF (ITB). Homebuilders have been rising this year as optimism regarding improving demand trends has superseded lukewarm results.
Investors will want to hear LGI confirm that demand for new homes has picked up and that the spring selling season has started strong with a rebound following the slowdown last fall.