Smith Douglas Homes (NYSE:SDHC) Posts Quarterly Earnings Results, Misses Estimates By $0.08 EPS

Key Points

• Smith Douglas Homes missed earnings expectations: Quarterly EPS was $0.03, $0.08 below consensus, although revenue rose 22% year over year to $273.03 million and exceeded estimates.
• Profitability weakened significantly as higher incentives, pricing adjustments, inventory impairments and lot-abandonment charges pressured results; adjusted EBITDA fell to $13.4 million from $19.8 million.
• The near-term outlook remains cautious: Management expects lower third-quarter gross margins of 16%–16.5% and is withholding full-year guidance due to variable demand, while analysts have a consensus “Reduce” rating and a $13.90 target price.

Smith Douglas Homes (NYSE:SDHC - Get Free Report) released its quarterly earnings results on Thursday. The company reported $0.03 earnings per share for the quarter, missing the consensus estimate of $0.11 by ($0.08), FiscalAI reports. The firm had revenue of $273.03 million during the quarter, compared to the consensus estimate of $258.10 million. Smith Douglas Homes had a negative return on equity of 0.19% and a net margin of 0.64%.

Here are the key takeaways from Smith Douglas Homes' conference call:

• Net orders rose 32% year over year to 970, while closings increased 25% to 839 and revenue grew 22% to $273 million. The company ended the quarter with 1,000 homes in backlog, up 17% year over year.
• Profitability deteriorated as incentives and pricing adjustments increased; adjusted gross margin was approximately 19% and adjusted EBITDA fell to $13.4 million from $19.8 million a year earlier. The company recorded $3.1 million of inventory impairments and $4.5 million of lot abandonment charges.
• Management expects third-quarter closings of 825–900 homes, average selling prices of $315,000–$320,000, and gross margin of only 16%–16.5%. The outlook reflects continued use of incentives and price reductions, and the company is not providing full-year guidance because demand remains variable.
• Smith Douglas continued expanding its platform, reaching 110 active communities, up 20% year over year, while maintaining a land-light strategy with 21,655 option lots and only 3% of controlled unstarted lots owned on balance sheet. The company also repurchased $4.4 million of stock during the quarter, bringing year-to-date repurchases to approximately $10.1 million.

Smith Douglas Homes Trading Down 1.0%

Shares of Smith Douglas Homes stock traded down $0.14 on Friday, hitting $13.91. 46,168 shares of the company traded hands, compared to its average volume of 45,471. The firm's 50-day simple moving average is $14.51 and its 200 day simple moving average is $14.63. The company has a market cap of $706.35 million, a P/E ratio of 19.32 and a beta of 0.88. Smith Douglas Homes has a 12-month low of $10.72 and a 12-month high of $23.49.

Institutional Inflows and Outflows

A number of institutional investors have recently added to or reduced their stakes in SDHC. Raymond James Financial Inc. bought a new stake in Smith Douglas Homes during the second quarter worth about $34,000. Tower Research Capital LLC TRC purchased a new position in shares of Smith Douglas Homes during the 2nd quarter valued at about $90,000. Price T Rowe Associates Inc. MD purchased a new position in shares of Smith Douglas Homes during the 4th quarter valued at about $182,000. VARCOV Co. bought a new stake in Smith Douglas Homes in the 4th quarter worth approximately $200,000. Finally, Victory Capital Management Inc. bought a new stake in Smith Douglas Homes in the 3rd quarter worth approximately $346,000.

Analyst Upgrades and Downgrades

Several equities analysts recently commented on SDHC shares. Weiss Ratings restated a "sell (d+)" rating on shares of Smith Douglas Homes in a research report on Friday, July 17th. Wall Street Zen raised Smith Douglas Homes from a "sell" rating to a "hold" rating in a report on Saturday, June 13th. Finally, Zacks Research upgraded Smith Douglas Homes from a "strong sell" rating to a "hold" rating in a research report on Friday, May 15th. One equities research analyst has rated the stock with a Buy rating, seven have issued a Hold rating and two have given a Sell rating to the stock. According to MarketBeat.com, the stock currently has a consensus rating of "Reduce" and a consensus target price of $13.90.

Smith Douglas Homes Company Profile

Smith Douglas Homes Corp., together with its subsidiaries, engages in the design, construction, and sale of single-family homes in the southeastern United States. It also provides closing, escrow, and title insurance services. The company sells its products to entry-level and empty-nest homebuyers. Smith Douglas Homes Corp. was founded in 2008 and is headquartered in Woodstock, Georgia.

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