Beazer Homes (BZH) Shares Rise on Q4 Earnings & Revenue Beat

Beazer Homes USA, Inc. BZH shares climbed 2.7% after it reported fourth-quarter fiscal 2020 results, wherein earnings and revenues handily beat the respective Zacks Consensus Estimate. The company also guided double-digit EPS growth for fiscal 2021.

Chairman and CEO Allan P. Merrill said, “With our deleveraging objective of reducing debt below $1B clearly in sight, we expect increased land and development spending during 2021 will allow us to increase the number of lots we own or control through options by year end, which we believe positions us for top and bottom-line growth in the years ahead”.

Earnings & Revenue Discussion

Fiscal fourth-quarter net income from continuing operations was $24.6 million. It included one-time items related to loss on debt extinguishment, inventory impairments and abandonments, as well as restructuring and severance charges. Excluding these items, the company generated net income from continuing operations of $25.6 million compared with $23.8 million in fourth-quarter fiscal 2019.

Beazer Homes reported quarterly adjusted earnings of 85 cents per share, which surpassed the Zacks Consensus Estimate of 58 cents by 46.6%. In the year-ago period, the company’s earnings were 93 cents per share.

Total revenues came in at $686.7 million, down 12.1% year over year. The reported figure beat the consensus mark by 10.4%.

Beazer Homes USA, Inc. Price, Consensus and EPS Surprise

Beazer Homes USA, Inc. Price, Consensus and EPS Surprise

Beazer Homes USA, Inc. price-consensus-eps-surprise-chart | Beazer Homes USA, Inc. Quote

Home Closings, Orders, Margins

Homebuilding revenues of $679.1 million decreased 12.2% from the prior-year quarter. It generated higher revenues in the West region, offset by lower contribution from East and Southeast regions. The decline was due to a 13.8% decrease in home closings to 1,737 homes.

Nonetheless, net new orders increased 37.8% from the prior year to 2,009, achieving the highest fourth-quarter level in more than a decade owing to high demand experienced during the quarter.

Order backlog of homes at quarter-end was 2,509 homes, up 46.9% year over year. The value of backlog was also up 49.6% from the prior year to $995.3 million.

Homebuilding gross margin (excluding impairments, abandonments and amortized interest) was up 180 basis points (bps) to 21.7% for the fiscal fourth quarter, owing to lower sales incentives and higher pricing.

Selling, general and administrative expenses, as a percentage of total revenues, increased 160 bps year over year to 11.1%. This increase was due to a decrease in home closings and homebuilding revenues in the quarter.

Balance Sheet Details

At fiscal fourth quarter-end, the company had $577.7 million of available liquidity, including $327.7 million of unrestricted cash and $250.0 million available on the secured revolving credit facility.

Company Outlook

The company highlighted that the dollar value of its backlog is 50% higher than the year-ago period. Hence, with lower interest expense, it expects double-digit growth in earnings per share for fiscal 2021 despite a reduction in community count.

Zacks Rank

Currently, Beazer Homes carries a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

D.R. Horton, Inc. DHI — a Zacks Rank #3 (Hold) company — reported fourth-quarter fiscal 2020 results, wherein earnings and revenues handily beat the respective Zacks Consensus Estimate. The homebuilder increased quarterly cash dividend by 14% to 20 cents per share.

PulteGroup Inc. PHM — a Zacks Rank #1 stock — reported third-quarter 2020 results, wherein earnings and revenues handily surpassed the Zacks Consensus Estimate, buoyed by higher demand.

NVR, Inc. NVR — also a Zacks Rank #1 stock — reported better-than-expected results for third-quarter 2020, wherein earnings and revenues topped the Zacks Consensus Estimate. The quarterly results benefited from solid housing market fundamentals in the United States, courtesy of low mortgage rates.

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