What Happened?
Shares of homebuilder Tri Pointe Homes (NYSE: TPH) fell 6.5% in the afternoon session after it reported second-quarter results that, despite beating analyst expectations, revealed significant declines in key operational metrics and a weaker outlook. Although the headline numbers for revenue and earnings per share surpassed analyst estimates, investors focused on the significant year-over-year declines in performance. Home sales revenue fell 22% and net income was nearly halved compared to the same quarter last year. More concerning were the forward-looking indicators. New home orders dropped by 31.5%, and the cancellation rate increased. The company's backlog, a key indicator of future revenue, also plummeted by 41% year-over-year. To top it off, the company's guidance for the third quarter implied a sequential slowdown in home deliveries, signaling that the weakness could continue.
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What Is The Market Telling Us
Tri Pointe Homes’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock dropped 8.8% on the news that the company reported weak fourth-quarter results: Backlog fell sharply, down 35% in units and 28% in dollar value, raising concerns about future growth. Management blamed "elevated mortgage rates" for the weakness. On the other hand, sales and EBITDA came in ahead of expectations during the quarter. Looking ahead, management remains optimistic about 2025, citing early signs of demand recovery. Overall, this was a mixed yet challenging quarter.
Tri Pointe Homes is down 8.2% since the beginning of the year, and at $32.94 per share, it is trading 29.4% below its 52-week high of $46.69 from October 2024. Investors who bought $1,000 worth of Tri Pointe Homes’s shares 5 years ago would now be looking at an investment worth $2,022.
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