Fine Finish to 2003

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Why 2003 was a good year for GIANTS; debating planning principles; designing for hivers.

February 01, 2004

Ask most GIANTS about 2003, and the most common response likely will be, "Play it again." Low interest rates, a ho-hum stock market and constrained supply combined to create another year of strong demand for new homes in nearly every major metropolitan market. Add to this a fixation among the largest builders on process improvement, cost containment and margin improvement, and 2003 shapes up as a year worth repeating.

Here's a look at the fourth-quarter tally among some of the industry's largest public builders:


  • Pulte Homes: Domestic home sales revenue totaled $2.92 billion, up 24% year over year, driven by a 17% increase in closings to 11,159 units and a 6% rise in average selling price to $261,350. Earnings per share totaled $1.95, a 40% increase from the year-ago quarter.

    Wall Street response: Credit Suisse First Boston maintains its neutral rating. UBS continues its Buy 1 rating.

  • Ryland Homes: Home building top line grew by 14% to $1.01 billion thanks to a 7.4% increase in deliveries to 4,400 units and a 6.4% increase in average price to $230,554. In addition to revenue growth, home building gross margins increased 160 basis points to 22.9% while SG&A expense as a percentage of sales dropped 10 bps to 9.1%.

    Wall Street response: UBS Buy 1 rating is unchanged, as is the neutral rating from CSFB.

  • Lennar Corp.: Home building revenue increased 12% to $2.66 billion because of a 14% increase in deliveries to 10,456 and a 2% decline in average selling price to $254,800. Home sales operating margin increased 30 bps to 15.3%, as gross margin expanded 30 bps to 25.2% and SG&A as a percentage of sales increased 10 bps to 9.9%.

    Wall Street response: CSFB upgraded Lennar to outperform from neutral, suggesting that the stock warrants a premium greater than its current 9%. JMP Securities restated its strong buy rating, while senior analyst Barbara Allen at Natexis Bleichroeder forecasts a decline in estimated earnings per share for 2004 to $6.55.


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