Homebuilder NVR (NYSE:NVR) missed Wall Street’s revenue expectations in Q1 CY2025, with sales flat year on year at $2.35 billion. Its GAAP profit of $94.83 per share was 10.6% below analysts’ consensus estimates.
Revenue: $2.35 billion vs analyst estimates of $2.38 billion (flat year on year, 1.4% miss)
EPS (GAAP): $94.83 vs analyst expectations of $106.08 (10.6% miss)
Operating Margin: 16%, down from 18.5% in the same quarter last year
Backlog: $4.84 billion at quarter end, down 7.3% year on year
Market Capitalization: $21.18 billion
Company Overview
Known for its unique land acquisition strategy, NVR (NYSE:NVR) is a respected homebuilder and mortgage company in the United States.
Home Builders
Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, NVR grew its sales at a decent 7.7% compounded annual growth rate. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.
NVR Quarterly Revenue
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. NVR’s recent performance shows its demand has slowed as its annualized revenue growth of 1% over the last two years was below its five-year trend.
NVR Year-On-Year Revenue Growth
NVR also reports its backlog, or the value of its outstanding orders that have not yet been executed or delivered. NVR’s backlog reached $4.84 billion in the latest quarter and averaged 1.5% year-on-year growth over the last two years. Because this number is in line with its revenue growth, we can see the company effectively balanced its new order intake and fulfillment processes.
NVR Backlog
This quarter, NVR’s $2.35 billion of revenue was flat year on year, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to decline by 2.3% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.
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Operating Margin
NVR has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 18.7%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.
Looking at the trend in its profitability, NVR’s operating margin rose by 2.6 percentage points over the last five years, as its sales growth gave it operating leverage.
NVR Trailing 12-Month Operating Margin (GAAP)
This quarter, NVR generated an operating profit margin of 16%, down 2.5 percentage points year on year. Since NVR’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
NVR’s EPS grew at a spectacular 17.3% compounded annual growth rate over the last five years, higher than its 7.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
NVR Trailing 12-Month EPS (GAAP)
Diving into the nuances of NVR’s earnings can give us a better understanding of its performance. As we mentioned earlier, NVR’s operating margin declined this quarter but expanded by 2.6 percentage points over the last five years. Its share count also shrank by 19.2%, and these factors together are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
NVR Diluted Shares Outstanding
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For NVR, its two-year annual EPS growth of 1.1% was lower than its five-year trend. We hope its growth can accelerate in the future.
In Q1, NVR reported EPS at $94.83, down from $116.41 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects NVR’s full-year EPS of $485.94 to stay about the same.
Key Takeaways from NVR’s Q1 Results
We struggled to find many positives in these results as its revenue, backlog, and EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $7,149 immediately following the results.
