NVR, Inc. (NVR) is one of the largest homebuilding and mortgage banking companies in the U.S. The company operates through its Homebuilding and Mortgage Banking segments and engages in the construction and sale of single-family detached homes, townhomes, and condominium buildings under names like Ryan Homes, NVHomes, and Heartland Homes.
The company recently reported its third-quarter financial results. The company’s revenues from the Homebuilding segment marked strong growth of 6.6% year-over-year to $2.68 billion. Its consolidated revenues for the nine months that ended September 30, 2024, were $7.68 billion, up 8% from the same period of 2023.
During the third quarter, NVR’s new orders increased by 19% to 5,650 units, compared to 4,746 units in the third quarter of 2023, and the average sales price of new orders was $450,700. Further, settlements in the third quarter increased 5% to 5,908 units, from 5,606 units in the prior-year quarter, where the average settlement price was $453,200, up 1% year-over-year.
In September, the U.S. single-family homebuilding surged at 2.7%, marking its five-month high, and building permits for single-family housing were also up. Also, the NAHB/Wells Fargo Housing Market Index surged to 43 in the current month from 41 in September, indicating increasing confidence in the U.S. home builders.
Also, rapid global population growth, economic growth, and increasing disposable income of consumers are surging activities like acquisition and development of land, and construction and sale of residential homes. The residential building construction market is expected to reach around $5.80 trillion by 2028, growing at a CAGR of 5.8%.
Moreover, the recently announced fed rate cuts will benefit the homebuilding sector and operations of NVR since prospective buyers who have been holding out for lower mortgage rates will now become active. This will also strengthen the company’s market position and competitiveness.
Shares of NVR have gained 20.9% over the past six months and 71.4% over the past year to close its last trading session at $9438.35.
Let’s look at factors that could influence NVR’s performance in the upcoming months.
Recent Developments
On April 25, NVR signed an agreement with La Cité Development, a leading real estate development corporation, to address much-needed housing solutions by adding 180 units of single-family homes to a large-scale redevelopment of 32.94 acres in Poppleton, West Baltimore, for approximately $800 million.
This mixed-income development, representing an investment of $60 million, will consist of 48 condo units and 132 townhomes on seven acres.
Robust Financials
For the third quarter that ended September 30, 2024, NVR’s Homebuilding revenues increased 6.6% year-over-year to $2.68 billion and its Mortgage banking fees were $55.31 million. Also, the company’s homebuilding operating income grew marginally from the year-ago value to $510.52 million.
Furthermore, the company’s net income and EPS came in at $429.32 million and $130.50 for the quarter, respectively.
As of September 30, 2024, NVR’s cash and cash equivalents and total assets stood at $2.47 billion and $6.49 billion, respectively.
Solid Historical Growth
NVR’s revenue grew at a CAGR of 4.2% over the past three years, while its EBITDA improved at a CAGR of 8.5%. Its EBIT increased at a CAGR of 8.7% over the same period, while the company’s net income and EPS grew at respective CAGRs of 10.6% and 16.6% over the same time frame.
Furthermore, the company’s tangible book value and levered free cash flow have grown at CAGRs of 12.5% and 24.3% over the past three years, respectively.
Favorable Analyst Estimates
Analysts expect NVR’s revenue for the fourth quarter (ending December 2024) to come in at $2.83 billion, indicating an increase of 18.4% year-over-year, and its consensus EPS is expected to improve 8.4% year-over-year to $131.73 for the same period.
For the fiscal year (ending December 2024), the company’s revenue is anticipated to grow 11.6% year-over-year to $10.40 billion, while its EPS is expected to grow 7.2% year-over-year to $496.77. Further, street expects NVR’s revenue and EPS to grow 4.5% and 5.8% year-over-year to $10.86 billion and $525.64 for the fiscal year 2025, respectively.
Favorable Profitability
NVR’s trailing-12-month EBIT margin of 19.98% is 149.3% higher than the 8.01% industry average. The stock’s trailing-12-month net income margin of 15.90% is significantly higher than the industry average of 4.50%. And the stock’s trailing-12-month levered FCF margin of 12.54% is 153.2% higher than the industry average of 4.95%.
Furthermore, the stock’s ROCE, ROTC, and ROTA of 38.72%, 24.47%, and 25.19% favorably compares to the 11.37%, 6.18%, and 4.03% industry average, respectively.
POWR Ratings Appear Optimistic
NVR’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NVR has an A grade for Momentum. The stock is trading above its 50-day and 200-day moving averages of $9,340.39 and $8,102.13, respectively.
The stock also has a B grade for Quality, consistent with its higher-than-industry profitability.
NVR is ranked #4 among the 22 stocks in the Homebuilders industry.
Beyond what I have stated above, we have also given NVR grades for Stability, Growth, Sentiment, and Value. Get access to all the NVR ratings here.
Bottom Line
NVR reported better-than-expected earnings in the third quarter of fiscal 2024. Further, the company’s long-term prospects appear promising, driven by its expanding product offerings, economic growth, and favorable government initiatives.
Given NVR’s solid revenue growth, promising analysts’ expectations, and favorable profitability, supported by the surrounding environment and widening avenues, it could be ideal to invest in this stock.
How Does NVR Inc. (NVR) Stack Up Against Its Peers?
While NVR has an overall POWR Rating of B, investors could also check out these other stocks within the Homebuilders industry with A (Strong Buy) or B (Buy) ratings: M/I Homes, Inc. (MHO), Sekisui House Ltd. ADR (SKHSY), and TRI Pointe Group, Inc. (TPH).
For exploring more A and B-rated homebuilders stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NVR shares were unchanged in after-hours trading Wednesday. Year-to-date, NVR has gained 34.44%, versus a 22.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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