Optimistic Third-Quarter Earnings for Cavco Industries (CVCO)

Encouraging Q3 Results

Cavco Industries (CVCO) reported mixed Q3 2024 earnings, showing a decrease of 10.8% in net revenue to $446.8 million compared to the previous year. The factory-built housing segment experienced a lower unit volume and average revenue per home, resulting in the decline in net revenue. Despite this, the company’s cash balance improved significantly, rising 30% to $352.8 million.

Key Takeaways from Q3

• Net revenue decreased by 10.8% to $446.8 million compared to the previous year.
• Cash balance increased by 30% to $352.8 million.
• Selling, general, and administrative expenses increased due to ongoing litigation and higher compensation expenses.

Company Outlook and Highlights

Cavco is optimistic about the dealer channel performance and expects improvements in order rates over the next quarters. The company is excited about the Anthem product for multifamily units and plans to produce variations across the country. Cavco will continue to pursue acquisitions and improvements in lending operations.

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• The factory-built housing segment experienced a decrease in net revenue due to lower unit volume and average revenue per home.
• Net income declined to $59.5 million, with diluted earnings per share falling to $4.27.
• Cash balance increased by 30% to $352.8 million.
• Gross margins in the housing segment decreased to 22.4%, while financial services gross margin increased to 36.8%.
• The company announced a new $100 million stock repurchase program.
• Cavco did not provide specific guidance for the upcoming quarter but expects higher order rates in 2024.

Earnings Call Key Insights

InvestingPro data paints a detailed picture of the company’s financial health and performance. With a market capitalization of $2.86 billion and a P/E ratio of 17.38, Cavco maintains a solid position in the market. The company’s P/E ratio for the last twelve months as of Q2 2024 stands at a lower 14.67, suggesting a potentially more attractive valuation for investors considering the company’s earnings power.

InvestingPro Insights

InvestingPro Tips highlight that Cavco holds more cash than debt on its balance sheet, a sign of financial stability that may reassure investors in uncertain times. Additionally, the company’s liquid assets exceed its short-term obligations, indicating a strong liquidity position that could support operations and strategic initiatives such as the newly announced stock repurchase program. Investors looking for more in-depth analysis will find additional insights with an InvestingPro+ subscription, now available at a special New Year sale with discounts of up to 50%. Use coupon code “SFY24” to get an additional 10% off a 2-year subscription, or “SFY241” to get an additional 10% off a 1-year subscription.

Full transcript – Cavco Industries (CVCO) Q3 2024:

Good day, and thank you for joining us for Cavco Industries third quarter fiscal year 2024 earnings conference call. During this call, you’ll be hearing from Bill Boor, President and Chief Executive Officer; Allison Aden, Executive Vice President and Chief Financial Officer; and Paul Bigbee, Chief Accounting Officer. The company’s board of directors approved a new $100 million stock repurchase program. Our strategic capital allocation priorities remain an improvement further acquisitions and ongoing evaluation of the opportunities in their lending operations.

Net revenue for the third fiscal quarter of 2024 was $446.8 million, down $53.8 million or 10.8% compared to $500.6 million during the prior year. Within the factory-built housing segment, net revenue was $427 million, down $54.2 million or 11.3% from $481.2 million in the prior year quarter. Financial Services segment net revenue increased 2.1% to $19.8 million from $19.4 million, primarily due to more insurance policies in-force, partially offset by fewer loan sales.

Selling, general, and administrative expenses in Q3 of 2024 were $63.3 million or 14.2% of net revenue compared to $58.9 million or 11.8% of net revenue during the same quarter last year. Financial Services gross margin increased sequentially 90 basis points to 36.8% from 35.9% due to higher net insurance premiums earned.

Net income attributable to Cavco shareholders was $36 million compared to net income of $59.5 million in the same quarter of the prior year and diluted earnings per share in Q3 of 2024 was $4.27 per share versus $6.66 per share in last year’s third quarter.

Our cash balance was $352.8 million, up $81.4 million or 30% from $271.4 million at the end of the prior fiscal year. The increases are primarily due to net income adjusted for non-cash items, such as depreciation and stock compensation expense and working capital adjustments, including inventory decreases, which provided $51.2 million from lower balances of raw materials in our production facilities and finished goods at our retail locations. Our acquisition of five retail stores and associated inventory for $19.7 million and share repurchases for $96.8 million. Primary uses of cash for the nine months, offsetting the above include decreases in accounts payable, accrued expenses and other liabilities of approximately $23 million. The company’s board of directors approved a new $100 million stock repurchase program. It can be used to purchase its outstanding common stock. To ensure the rewritten article is original, unique, and beneficial, and it thus meets standard Google criteria.The company remains committed to pursuing acquisitions and improvements in lending operations. Despite the downturn in revenue, Cavco’s cash balance improved significantly, rising 30% to $352.8 million. Net other expense this quarter was $0.2 million compared to $0.3 million in the prior year quarter. Pretax profit for Q3 2024 was $43.9 million down $32.2 million from the prior year period. The effective income tax rate was 18% for the third fiscal quarter, compared to 21.7% in the same period last year. The change between periods is primarily the result of higher benefits from stock option exercises

Cavco Industries (CVCO) continues to navigate a challenging market, as reflected in the recent earnings report. With a market capitalization of $2.86 billion and a P/E ratio of 17.38, Cavco maintains a solid position in the market. Notably, the company’s P/E ratio for the last twelve months as of Q2 2024 stands at a lower 14.67, suggesting a potentially more attractive valuation for investors considering the company’s earnings power. Investors looking for more in-depth analysis will find additional insights with an InvestingPro+ subscription, now available at a special New Year sale with discounts of up to 50%. Use coupon code “SFY24” to get an additional 10% off a 2-year subscription, or “SFY241” to get an additional 10% off a 1-year subscription.

While analysts anticipate a sales decline in the current year, the company has been profitable over the last twelve months and is predicted to remain profitable this year. This is underscored by a strong return over the last three months, with a 33.96% price total return, showcasing Cavco’s resilience and potential for growth.