Strong Demand in California, Southeast Sends Standard Pacific’s Profit Up Sharply
Irvine-based home builder Standard Pacific Corp. said Friday that profit surged 62% in the second quarter, helped by its recent expansion into the Southeast and the continued heavy demand in California. The increase was far sharper than expected.
“We’re selling virtually everything we build” in California, said Andrew H. Parnes, a senior vice president at Standard Pacific, the nation’s 12th-largest home builder as ranked by Professional Builder magazine.
Analysts said they expected the housing market to remain strong for the rest of the year, despite the recent uptick in mortgage rates.
Standard Pacific’s net income in for the quarter ended June 30 was $42 million, or $1.26 a share, compared with $26 million, or 81 cents, in the same period a year earlier. The earnings per share easily beat the 96-cent average estimate of analysts surveyed by Thompson First Call and surpassed internal expectations as well.
Revenue from home building grew 16% to $515 million in the second quarter. The number of homes delivered to market rose 28% to 1,822 as the firm benefited from last year’s expansion into Florida’s hot housing markets. California also is a robust performer for home builders.
Among the company’s strongest markets in Southern California are the Inland Empire, northern coastal San Diego County and Ventura County. It has Orange County projects in Irvine Ranch, Ladera Ranch and the Talega planned community in San Clemente.
During the second quarter, Standard Pacific’s average home price declined 10% to $293,000, reflecting its expansion in less-expensive markets and an effort to build more affordably priced homes. In California, most of its business is in the move-up market of $500,000 to $700,000. Homes sell for more than $1 million at two its developments near Newport Beach.
The home builder “should do well for quite a while,” said analyst James Wilson of JMP Securities in San Francisco, who gives the stock a “strong buy” rating. “We don’t see any logical road bumps in the near term.”
The housing market has been very strong and should stay that way for at least another quarter or two, said Keitaro Matsuda, a senior economist at Union Bank of California. Even with the nation’s economy strengthening in the second half of 2003, he said, that won’t be enough to provoke federal regulators to raise the low interest rates that have stoked home-buying demand.
Analyst Wilson said home builders such as Standard Pacific that have the resources to grow internally or through acquisitions are in a particularly strong position.
“It’s good to be a home builder,” Wilson said, “but it’s very good to be a large public home builder.”
Shares of Standard Pacific rose 55 cents to $33.96 on the New York Stock Exchange.
