Thursday, January 27, 2011

NVR's (NYSE:NVR) Homebuilding Revenue to Drop 2.3 Percent

NVR Inc.'s (NYSE:NVR) struggles will continue throughout 2011, although Ticonderoga remains high on the ability of the management team to execute.

Ticonderoga says, "Aside from a meaningful market-driven decline in Orders, albeit against a difficult comparison, we expect continued strong execution from the management team at NVR. With the equity up 12.9% year-to-date versus a 4.9% increase for the group, certainly investors see little reason to disagree. Were it not for the company’s premium valuation, the company’s performance decidedly deserves consideration of a more constructive rating...We forecast EPS before charges at a Street-high $8.69 per share, which is down nearly 10% YoY. The consensus, which may or may not include charges, is $7.38 per share.

"We expect a 2.3% decline in Homebuilding revenue to $713M, driven by an 8% decline in Closings to 2,340, based on a 74 basis point decline in the company’s Backlog Conversion Rate to 61.7%. We expect Closings ASPs of $305K (+6.5% y/y). On a year-over-year basis, we expect revenue to decline for the first half of this year until the tax credit’s positive impact on Closings in 2010 is anniversaried...With regard to profitability, we expect the Operating Margin to decline 49 bps YoY to a group-leading 9.6%, while improving roughly 130 basis points sequentially."

Ticonderoga maintains a "Neutral" rating on NVR Inc. (NVR), which closed Wednesday at $784.22, down $0.51, or 0.06 percent.

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