Standard Pacific earnings increase year-over-year
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Standard Pacific builds communities California, Texas, Florida, the Carolinas, Colorado, and Nevada. Roughly 75% of their business is in the move up market, with the remaining in the entry-level segment. That said, they do serve the high end as well, as their price range generally goes up to $1 million. Their average price point in California is over $500,000. 77% of their production is single family detached, while the balance is single family attached.
Standard Pacific reacted to the housing downturn by focusing on the move-up market and increasing price points,while much of their competition chose to focus on the lower priced entry-level market. They have experienced lower competition as a result, and they aren’t in a position of having to wait for the first-time home buyer to return. Standard Pacific also has a loan origination arm.
Highlights of the quarter
Standard Pacific reported earnings of $0.05 a share, in line with consensus estimates. Net new orders were up 49% in units, and 74% in dollar terms. Backlog was up 90% in units, and up 117% in dollar terms and was the highest since 2007. Revenues increased 61% and average selling prices are up 9% to $375,000. Gross margin increased to 21% from 20.3% a year ago.
Home building is a highly seasonal business, and a strong first quarter bodes well for the summer selling season. Standard Pacific’s numbers speak to strength in the luxury market.
Read-across to the other homebuilders
Given Standard Pacific’s emphasis on the move-up market, it closely resembles luxury home builder Toll Brothers (TOL). Most home builders, like Meritage (MTH) and Lennar (LEN), have already reported their first quarter earnings, and Toll is the only major one left. Overall, the sector performed well, with the exception of NVR, which has an East-Coast focus and hasn’t participated in the land grab that is going on in California, Las Vegas, and Phoenix.