Cavco Stock Jumps 13% as Manufactured Home Builder Posts Record Revenue and a Growing Backlog of Orders

Cavco Industries shares jumped 13% in early trading Friday. The manufactured home builder reported record quarterly revenue, higher home sales and a growing order backlog.

The stock rose $71.01, or 13%, to $618.26, lifting Cavco's market value to about $4.8 billion.

Record quarter

Cavco reported revenue of $656.4 million for its fiscal second quarter, which ended Sept. 26, up 17.9% from $556.5 million a year earlier. The results topped analysts' expectations.

"This is our second consecutive quarter of record revenue and unit volume," President and Chief Executive Bill Boor said.

The company sold 5,972 homes, up 15.3%. Net revenue per home rose 2.7% to $106,118.

Net income rose 5.8% to $55.4 million, or $7.17 a share, up from $6.55. The results included a one-time $7 million insurance premium refund, which added about 70 cents a share.

Key fiscal second-quarter figures:

Revenue: $656.4 million, up 17.9% Homes sold: 5,972, up 15.3% Diluted EPS: $7.17, up from $6.55 Gross margin: 22.5%, down from 24.2% Backlog: $348 million, up $50 million from the prior quarter Share buybacks: about $30 million

Backlog grows

Cavco's backlog rose to $348 million from $298 million at the end of the previous quarter, equal to about eight to 10 weeks of production.

"While orders were off the preceding quarter pace, they remained healthy and backlogs continued to grow," Boor said.

Capacity utilization was about 75%, unchanged from a year earlier.

Margins under pressure

Gross margin declined to 22.5% from 24.2% a year earlier, as factory-built housing margins fell to 21.1% from 22.9%.

Boor said margins improved slightly from the previous quarter as "selling price increases were in excess of cost pressures, resulting in a small sequential Gross Margin improvement."

The company's financial services business, which provides mortgage lending and insurance, increased revenue 5.8% to $22.6 million, and its gross margin rose to 60.2%.

Returning cash

Cavco bought back about $30 million of its shares during the quarter and has $158 million remaining under its repurchase authorization.

Affordable housing demand

Cavco builds factory-made homes sold under brands including Cavco, Fleetwood Homes and Palm Harbor. Manufactured homes are generally cheaper than site-built houses, making them an option for buyers priced out of the traditional market by high home prices and mortgage rates.

The company's results suggest steady demand for lower-cost housing, although Boor's comment that orders slowed from the previous quarter points to some caution among buyers.

Before Friday's gain, the stock was up only about 3% over the past 52 weeks.

Investors will watch whether Cavco can keep growing sales while protecting margins as it navigates a challenging housing market.