Standard Pacific (SPF) reported $0.31 per share net income on revenue of $339.8M for 4Q of 2009. The net income of $82.7 million included an income tax benefit of $94.1 million. Without the tax benefit, the company would have reported a small operating loss. This result is less appealing than the pre-tax profit reported from M/I Homes (MHO) this morning. It is also much less so than the result from D.R. Horton (DHI) reported yesterday.
Its gross margin improved to 20.3% from 18.6% in the third quarter, excluding the relatively small impairments. This is one of the company’s strong areas, and it is getting stronger. The company’s cash position has continued to increase due to land sales and tax refund.
Community counts are down sequentially from 139 average selling communities in the third quarter to 128. Net new orders totaled 554, down from 922 in the third quarter. Compared to 2008, the net new orders are up by only 1%. But on the “same store” basis, they’re actually up by 40%. The dynamics is very different from the “brisk” sales activities reported by D.R. Horton. Horton’s net sales orders were up 45% year over year.
This is an important point for analysis. Since the margin is healthy and steady. Profitability rests on increasing sales. Horton appeared to be completely out there to take advantage of the federal tax credit for the first time home buyers, and was able to generate sales profitably. There is an important question as to how long it can last with the pending expiration of that credit.
Standard Pacific appeared to be getting at it much more cautiously. It has increased land acquisition with small steps. It is still consolidating its balance sheet. No question, Horton’s balance sheet is much stronger, and can afford to be more aggressive.
The question for investors though is, given the state of the economy and the eventual withdrawal of the federal tax credit, which approach seems more beneficial for the long term? And for what price? DHI shares are priced richly at nearly 2 times book, while SPF is trading at about its book.
We hope to gain more insights from the conference call on Thursday.
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It was a disappointing quarter. Standard Pacific didn't even try to take advantage of the federal tax credit to spur sales. It mothballed too many communities... Market's reaction was not kind. Shares now down 14%, back to mid-3. High expection is met with big disappointment... Overall market turmoil from sovereign debt problems to unemployment claims didn't help.
ReplyDeleteWe see this as a good buying opportunity, if you believe the economy will eventually recover, especially in Cal.