LGI Homes Reports Revenue Growth and Community Expansion

image

LGI Homes Reports Revenue Growth and Community Expansion

LGI Homes, Inc. (LGIH) reported a successful period in the third quarter of 2024 with significant increases in revenue and the number of communities. The company delivered 1,757 homes with a record average sales price of $371,004, resulting in $652 million in revenue, a year-over-year increase of 5.6%. Adjusted gross margin rose slightly to 27.2%, while diluted earnings per share increased by 4% year-over-year to $2.95.

Key Highlights:

  • LGI Homes delivered 1,757 homes at an average sales price of $371,004.
  • Revenue reached $652 million, up 5.6% year-over-year.
  • Adjusted gross margin increased to 27.2% compared to the previous quarter.
  • Diluted earnings per share increased to $2.95, reflecting a 4% year-over-year rise.
  • The number of communities grew by 30% year-over-year to 138.
  • The company expects to deliver between 6,100 and 6,400 homes in 2024.

Company Outlook: LGI Homes anticipates delivering between 6,100 and 6,400 homes in 2024. The average sales price is expected to be between $360,000 and $370,000. Gross margin guidance has been raised by 50 basis points, with expected gross margins between 24% and 25% and adjusted gross margins between 26% and 27%. The number of communities is expected to grow between 10% and 20% by 2025.

Negative Points: The company reported a slowdown in sales activity in October, reflecting a trend seen across the industry. High interest rates have affected housing affordability, making homeownership more challenging for many individuals. A cancellation rate of 26.2% was reported, reflecting the market's challenges.

Positive Points: Despite the market challenges, the long-term outlook remains positive, supported by solid housing market fundamentals. The company remains optimistic about demand, citing a strong number of potential customers for homeownership. The number of communities remained stable at 138 in October, with 12 new openings planned for November.

Missing Information: There were no specific deficiencies mentioned in the earnings summary.

Q&A Highlights: Management discussed maintaining the quality of their homes and integrating Terrata homes into their offerings. Emphasis was placed on community growth and overall expense management. Financial targets include a 20% return on equity as new communities come online.

In conclusion, LGI Homes is focusing on strategic growth and profitability in a challenging market. The company's expansion in the number of communities and commitment to maintaining product quality amid affordability concerns indicates a positive trajectory for the future. Management continues to rely on the resilience of the U.S. economy and labor market to support profitable outcomes and shareholder value creation.

InvestingPro Insights: LGI Homes' recent performance aligns with several key metrics and projections from InvestingPro. The 5.56% revenue growth in the third quarter of 2024 corroborates the annual increase of 5.6% mentioned in the earnings report. This growth is particularly notable given the highlighted challenging market conditions.

InvestingPro data shows that LGI Homes has a P/E ratio of 12.87, which is relatively low compared to a PEG ratio of 1.45, indicating that the company's stock may be undervalued in relation to its earnings growth potential. Additionally, the company's price-to-book ratio of 1.27 suggests that the stock is trading close to its book value, presenting potential value for investors.

One InvestingPro Tip highlights that LGI Homes experienced a significant total return of 9.41% in the past week. This recent positive momentum can be attributed to the company's strong third-quarter performance and elevated guidance for gross margins.

Another pertinent InvestingPro Tip indicates that analysts are forecasting the company to be profitable this year, consistent with the positive outlook and financial targets discussed in the earnings report. This profitability expectation is supported by the reported operating income margin of 10.33% for the last twelve months.

It is worth mentioning that InvestingPro provides 8 additional tips for LGI Homes, offering investors a comprehensive analysis of the company's financial health and market position.