Key Takeaways
-
Cavco Industries stock jumped 12% after fiscal second-quarter EPS of $7.17 beat the $5.42 analysts expected, on record revenue.
-
A one-time insurance refund added $0.70 to EPS, but the quarter still beat estimates without it.
-
Materials costs cut factory-built gross margin to 21.1% from 22.9% a year earlier, even as backlog grew to $348 million.
-
Champion Homes reports next week, and supplier Patrick Industries' figures show the industry growing far slower than Cavco.
Cavco Industries ( CVCO:NASDAQ )stock jumped 12% today on record revenue, a big earnings beat and its first data center orders.
That matters for rival Champion Homes ( SKY:NYSE ), which reports next week, and for supplier Patrick Industries ( PATK:NASDAQ ), whose figures say Cavco is far outgrowing the industry.
A record quarter, with an asterisk
Cavco reported after Thursday's close for its quarter ended Sept. 26:
-
Revenue rose 17.9% to a record $656.4 million, against the $613.1 million analysts expected.
-
Homes sold rose 15.3%, from the American Homestar acquisition and organic growth.
-
EPS was $7.17, against a $5.42 consensus.
But a one-time $7 million insurance premium refund added $0.70 a share. Without it, EPS was $6.47, still well ahead of estimates.
Materials are eating into margins
Margins are the catch. Company-wide gross margin fell to 22.5% from 24.2% a year earlier as input costs rose.
CEO Bill Boor said price increases outran costs, "resulting in a small sequential Gross Margin improvement," but expects materials inflation to persist.
TIKR tracks 5 analysts on Cavco Industries. How many say "Buy"?
See the full breakdown of Buy, Hold, and Sell ratings on Cavco Industries, along with Wall Street's revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Cavco Industries' Analyst Ratings
Data centers show up in the backlog
Orders slowed from the prior quarter, yet backlog rose $50 million to $348 million. Some of that is new: "we began to see data center workforce housing orders and shipments during the quarter which are contributing to healthy backlogs," Boor said. Cavco didn't say how big those orders are.
Champion faces the same questions. In its quarter to June 27, net sales rose just 1.3% to $710.2 million, with backlog at $421.8 million and higher material costs only partly offset. Will its backlog grow like Cavco's, and will its margin take the same hit?
Patrick's housing revenue rose 4% in its third quarter, and it estimates industry shipments of manufactured homes rose just 2%. So Cavco is far outgrowing the industry, with its acquisition doing some of the work. For Patrick, data center orders would need to lift the whole industry to matter.
Most of the way to the target
Northland initiated coverage Wednesday with an Outperform rating and a $650 target, and today's jump gets the stock most of the way there. Here's Cavco's forward P/E over the past five years:
My take: even without the refund, this was a strong quarter, and the backlog gives Cavco a cushion going into winter. From here, the stock needs margins to stop slipping and those data center orders to grow.
Of course, Boor flagged "the seasonally slower winter months" ahead, so next quarter's orders matter.
So what is Cavco stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR's valuation model and see what Cavco could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It's free to use.
