Standard Pacific Profits Beat Estimates
Standard Pacific Corp., buoyed by the lucrative California real estate market, posted second-quarter earnings Monday that trounced Wall Street projections.
The Irvine home builder posted earnings of $20 million, or 69 cents a share, surpassing analysts’ projections of 55 cents. A year ago, the company’s operating earnings totaled $16.2 million, or 54 cents a share.
Chief Financial Officer Andy Parnes attributed the upside surprise to better-than-expected margins--a result of higher selling prices and moderating labor and building material costs. Land sales from a joint venture also added to the company’s earnings in the quarter.
Gross margins on the company’s home-building operations rose to 18.2% in the quarter from 17.2% a year earlier.
Home-building revenue fell 8.3% to $283.7 million, largely as a result of fewer sales and communities in the Bay Area, Parnes said. But the decrease was offset by higher home prices and stronger revenue from the company’s financial services business.
The average price of Standard Pacific homes delivered in California in the quarter rose 3.5% to $444,000 from a year ago, he said. Prices in Texas increased 22% to $285,000, while Arizona home prices averaged $169,000, up 2% from a year ago.
About 72% of the company’s home-building revenue in the quarter came from the California market, while about 13% was from Texas and 15% from Arizona, Parnes said in an interview.
The builder’s backlog, which reflects homes sold but not yet closed, was also robust, rising 27% to $606.3 million from $478.3 million a year ago.
Orders, which serve as a barometer for revenue two or three quarters down the line when a home sale closes, rose 24% in the quarter, primarily because of the increase in the new communities.
Parnes said Standard Pacific plans to grow primarily by bringing new communities online. The company had 80 communities open in the quarter, up 25% from 64 a year ago, and plans are in the works to open 25 more before year’s end, he said.
The home builder is expected to close its acquisition of Writer Corp. in the third quarter, which will move the company into the Colorado market.
Credit Suisse First Boston Corp. analyst Ian Lapey attributed much of the company’s surprise results to land sales the company did through a joint venture. Still, he said the company’s improvement in its gross margins outpaces the flat earnings many other builders are posting.
The stock climbed 44 cents a share Monday to $11.38 on the New York Stock Exchange.
