The Ryland Group Inc.
) adjusted net earnings of 80 cents per share in the second
quarter of 2013 surpassed the Zacks Consensus Estimate of 64
cents by 25% and the year-ago earnings of 14 cents by a huge
margin. The earnings upsurge was driven by top-line growth and
Total revenue of $493 million lagged the Zacks Consensus
Estimate of $498 million by 1.0%. Reported revenues climbed 67.8%
year over year, driven by better pricing power and volume growth
amid improved market conditions.
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RYLAND GRP INC (RYL): Free Stock Analysis
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Ryland Group is one of the largest homebuilders in the U.S, with
operations in 14 states. Like other homebuilders such as
D.R. Horton, Inc.
), Ryland has been gaining momentum from the strong recovery of
the U.S. housing market. Homebuilding revenues of $478 million
climbed 68.0% year over year on the back of a double-digit
increase in the number of homes closed and average selling price.
Net sales orders in the quarter totaled 2,191 homes, up 56.7%
from the prior-year quarter, bolstered by increased demand during
the quarter. The value of net orders grew 77.9% to $676.7
million, driven by an increase in volume and the number of active
selling communities. The company witnessed 24.4% year-over-year
increase in active communities to 260 communities during the
Home closings were up 48.8% to 1,659 homes in the reported
quarter compared with 1,115 homes in the year-ago quarter. The
company intends to maintain volume growth by focusing on sales in
the existing communities and by increasing community count.
Average closing price increased 13.0% to $287,000 during the
quarter due to favorable changes in product mix, lower incentive
levels and higher pricing. The increase in average closing prices
was highest in Southern California, Las Vegas, Houston and
The quarter-end sales order backlog rose 61.0% to 3,667 homes
from 2,277 homes at the end of the second quarter of 2013.
With the housing market gaining momentum, most homebuilding
companies are investing in building more homes to meet the
growing demand. The Ryland Group is also aggressively
investing in land and development in order to build more homes.
The company spent $176 million on land acquisition and $62
million on site development in the quarter.
Housing gross profit margin improved 170 basis points to 20.4%
during the quarter, driven by a decline in construction costs and
leverage from direct overhead expenses. Selling, general &
administrative (SG&A) expenses declined 400 basis points to
12.3% of homebuilding revenues due to higher leverage resulting
from revenue growth.
The company reported 34.2% increase in homebuilding pretax
earnings to $43.8 million in the second quarter of 2013
attributable to higher volume, expansion of housing gross profit
margin and a decline in selling, general and administrative
Financial services reported 63.0% increase in revenues to $15.0
million in the quarter. The segment reported 162.1% increase in
pretax earnings to $7.6 million due to increase in the locked
loan pipeline, higher origination volume and increased title
Fiscal 2013 Outlook
The company expects further expansion in gross margin in the
upcoming quarters on the back of declining lumber prices. The
company expects total land expenditure to exceed $700 million for
full year 2013. The company expects to end the fiscal year with
25% more communities compared to the prior year.
Ryland Group carries a Zacks Rank #1 (Strong Buy).