LGIH 2017 model update (May 2017)

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JAN 172 result in
FEB 224 result in
MAR 365 result in
APR 365 result in

MAY 452 my forecast
JUN 457 my forecast
JUL 462 my forecast
AUG 467 my forecast
SEP 473 my forecast
OCT 478 my forecast
NOV 483 my forecast
DEC 488 my forecast

TOTAL 4886

Eric said they expect to close 450-500 in May and 450 in each of June and July. The CFO also said that 5 of the communities that they will add won’t contribute to closings until 2018 so if that comes to be then my model would predicts 35 fewer homes closed, so 4851 instead of 4886.

The May 2017 results are in. LGIH closed 523 homes in May with 72 Active Selling Communities. Here’s the revised model:

JAN 172 result in
FEB 224 result in
MAR 365 result in
APR 365 result in
MAY 523 result in (452 was forecast so +71)

JUN 457 my forecast
JUL 462 my forecast
AUG 467 my forecast
SEP 473 my forecast
OCT 478 my forecast
NOV 483 my forecast
DEC 488 my forecast

TOTAL 4957 (previous forecast was 4886 so +71)

To recap the model is based on adding 0.8 ASC every month and multiplying the ASCs by the historical 6.3 closings per ASC. My model had 71.8 ASC for May and the actual number was 72 so we are on track. The closings per ASC in May were 7.3 which was 1.0 above the model.

The stock is up nicely in after hours trading.

Chris

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TOTAL 4957 (previous forecast was 4886 so +71)

Interesting.

My model had 555 closings for this May, so it is -36. May 2016 had 7.7 absorption rate. The 12-month moving average actually dropped from 5.6 to 5.5. No big thing. Monthly absorption rates have not been consistent year to year, 5.8 in May '15, 7.7 in May '16, 7.3 this May.

All in all, encouraging. My model has 456 closings for June and 385 for July. Not a prediction, mind you, just using 2015 monthly absorption on 2016 number of communities. I doubt the market would like those numbers too much. Just saying don’t be discouraged if it should happen.

KC, long LGIH (#2 position)

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I would have expected the +71 extra sales in May to result in a somewhat lower forecast for the following month or two. If nothing else the extra sales reduce the inventory level, which takes time to replenish.

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