The board of
) has authorized the repurchase of $300 million worth of shares,
as it had done last year in December. NVR has repurchased shares
$0.3 million shares in the second quarter 2013, reported on Jul
22. NVR now has $4.6 million worth of shares remaining in its
share buyback program.
The share buyback program helps the company reduce outstanding
share count, thereby increasing earnings per share and return on
equity. Apart from bolstering shareholder value, this strategic
move will also lift the relatively undervalued share price and
reflect the company's confidence in its fundamentals.
The company, which builds homes under trade names such as Ryan
Homes and Fox Ridge Homes, posted earnings growth of 13% to
$10.11 per share in the second quarter of 2013. The earnings
upside was backed by top-line growth, which was fueled by the
favorable situation in the housing market. However, earnings
missed the Zacks Consensus Estimate of $12.38 per share.
Consolidated revenues increased 31% to $1 billion in the
quarter driven by homebuilding revenues. It also beat the Zacks
Consensus Estimate of $988 million. The company witnessed solid
growth in new orders and backlog of homes sold in the second
quarter. Though the cancellation rate of 13.8% improved from
16.3% last year, it performed poorly from 13.2% in the first
quarter of 2013.
The rising demand for new homes has led to a favorable
situation in the housing market, where inventory levels are
dropping and prices are moving up. Ryland, like other
homebuilders such as
D.R. Horton, Inc.
), has been gaining momentum from the strong recovery of the U.S.
housing market. Recent comments by Federal Reserve Chairman Ben
Bernanke to keep interest rates low for some time provided
further momentum to the stock and the housing industry, in
It is also seen that the demand for luxury homes is very high.
Therefore adequate product introduction is necessary in order to
maintain the required level of inventory to meet the growing
demand for homes. We like NVR's initiative to constantly
introduce new products. With frequent introduction of products,
NVR will be able to capitalize on the improving housing market.
However, we would prefer to stay on the sidelines as the housing
market is still in the recovery stage and the rest of the
macroeconomic parameters are on a slow growth trajectory. NVR
holds a Zacks Rank #3 (Hold).
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