Shares of AMREP Corporation (AXR) fell by 6.8% following their latest earnings report for the quarter ending October 31, 2024. This decline contrasts with the S&P 500 Index, which saw a drop of 3.7% in the same timeframe. In the past month, AXR stock has decreased by 9.1% compared to the S&P 500’s 4.7% loss, illustrating ongoing operational challenges for the company.
Earnings Overview: Revenue and Growth
AMREP recorded total revenues of $11.9 million for the three months ended October 31, 2024, marking a 34.5% increase from $8.9 million one year earlier. This growth stemmed from a 19.9% rise in land sale revenues, totaling $5.9 million, and an extraordinary 51.5% jump in home sale revenues, which reached $5.3 million, attributed to higher sales volume and favorable pricing.
Net income for the quarter was $4 million, equating to $0.75 per diluted share, a substantial rise from $1.1 million, or $0.21 per diluted share, in the same quarter last year. Operating income surged by 199.1% year-over-year to $3.1 million, with notable growth in the homebuilding segment influenced by a 104.9% increase in other costs tied to expanded landscaping services.
Key Business Metrics
The land development segment experienced a 29.9% revenue increase to $7.7 million. A major highlight was the sale of 549 acres of contiguous undeveloped land in Sandoval County, NM, which contributed $2.5 million. Meanwhile, homebuilding revenues rose by 43.4% to $4.2 million, driven by 12 home sales compared to seven from the previous year. However, the average selling price fell to $444,000 from $503,000 due to changes in the type and location of homes sold.
Gross margins for land sales improved to 60% from 27% a year prior, as a result of enhanced public improvement reimbursements and the type of properties sold. Conversely, home sale gross margins dipped from 29% last year to 20% this quarter, affected by location, property size, and increased costs of materials and labor.
Operating income leaped to $3.1 million in the quarter, up 199.1% from $1.1 million a year ago, propelled by robust revenue growth. The company reported $0.6 million in net interest income, growing by 253.4% compared to $0.2 million last year. General and administrative expenses increased by 18% to $1.8 million, reflecting growth in homebuilding operations and equipment costs.
As of October 31, 2024, AMREP had $40.6 million in cash and equivalents, a rise from $30.2 million as of April 30, 2024. The company reported operating cash flows of $10.5 million for the quarter compared to $1.9 million last year, a boost attributed to inventory reductions. Capital expenditures remained modest at $120,000, showcasing a cautious approach toward new project developments in a volatile market.
AMREP Corporation Price, Consensus and EPS Surprise
AMREP Corporation price-consensus-eps-surprise-chart | AMREP Corporation Quote
Insights from Management
Management credited the robust revenue growth to an increase in land and home sales, while also highlighting their commitment to cost management amidst rising material and labor expenses. They noted challenges such as delays in municipal approvals and infrastructure availability that could influence future project timelines. To tackle affordability issues, the company is implementing sales incentives and adjusting the size of lots and homes.
Future Guidance and Market Considerations
While no specific guidance was given, management cautioned of potential declines in land sale revenues due to market challenges and delay in entitlement processes. Rising mortgage rates and inflation could further dampen housing demand. To navigate these obstacles, the company aims to manage its project pipeline strategically and maintain flexibility in its development approach.
Additional Developments
AMREP reported a 3.9% reduction in real estate inventory, which decreased to $63.4 million from $65.9 million since April 30, 2024, primarily due to land and home sales. Investment assets increased by 3.4% to $12.9 million from $12.6 million, reflecting additional properties leased to residential tenants.
Furthermore, the termination of AMREP’s pension plan led to a $1.2 million reclassification of income tax benefits, enhancing the net income for the quarter. The company also sold 585.2 acres of undeveloped land, classified as investment assets, in the six months leading to October 31, 2024, which contributed to incremental cash flow.
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