Closings were 637 with 79 active selling communities, absorption rate 8.1.
A year ago the absorption rate was 8.8 so 637 closings is up only 2.1% versus June '17. However, Q2 closings were +20.1% higher versus '17 and six months are up 34.2% vs. 17.
More data: Trailing 12 months closings for June '17: 4463; December '17: 5847; June '18: 6634.
More more data: Trailing 12 months closings for this year:
1/18 5952
2/18 6096
3/18 6330
4/18 6571
5/18 6620
6/18 6634
Estimated closings for 2018 from conference calls are 6000 to 7000 which were questioned as being excessively conservative. The trend is clearly towards 7000 plus and forecast is for 85 to 90 communities by 2018 year end versus current 79… They have opened Sacramento and are now in Alabama and Oregon (actually Oregon, not just way across the river in Washington). Las Vegas soon.
Conclusion: 7000 to 7100 closings this year. $7 eps. You select a p/e. Recent price $56 and change. Current $59.87, being up this week.
Well be interesting to see market reaction to the only 2.1% closings increase. If price drops into $56 area I would consider adding back my trading position. Currently I am slightly overweight, having closed out my trading position for a small loss.
KC, long LGIH
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<i>Well be interesting to see market reaction to the only 2.1% closings increase. If price drops into $56
area I would consider adding back my trading position.</i>
LGIH was down 3.17% following the June closings report. As expected, the headline was closings up only
2.2% from June ’17. I would point out several things.
June absoption rates since 2013 average 7.7. Last year’s comparison was 8.8 and this year it was 8.1
which is 5% above historic June average.
Last year’s 8.8 was partially a result of opening new communities in the first half of ’17, going from
63 to 71 in the first four months. Remember the January and February closings were low due to failure to
maintain inventory in the last half of ’16. The high ’17 sales were a result of more communities and pent up demand.
I finished my communities analysis yesterday. This is only my fourth monthly analysis so I don’t have a
lot of comparisons. But, I see that the number of grand openings versus “sold out” for the four reports:
Date Grand Openings Sold Out
4/6 10 12
5/5 13 11
6/6 17 7
7/6 18 10
Individual communities are included in these numbers for several months, how long I do not know. But it
appears to me that inventory will be up nicely in the last half of ’18.
4) As previously noted, the trailing 12 months closing numbers are trending towards the high end of the
6,000 to 7,000 closings projection for FY ’18.
5) LGIH closed at $57.97 on Friday, a TTM p/e of 11.2 and a forward p/e 9.7 to 8.3 for management’s
forecast of $6 to $7 per share for FY ’18. By the way, I calculate that the increased interest rate on
the new $300 million will cost LGIH 3 cents per share per year.
I placed a limit order at $57.87 for a very small number of shares before going to bed (12 hours ahead
here). I would like more at $56-something but am conflicted over what to sell as I want to maintain my
multi-year mandatory withdrawal in cash.
KC
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