Why NVR Shares Slid Off Their Foundation

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of homebuilder NVR (NYS: NVR) dropped by as much as 13% this morning after the company reported disappointing second-quarter-earnings results.

So what: For the quarter, NVR reported an 11% increase in revenue to $769.8 million and a profit of $8.97 as new home orders rose 6%. However, Wall Street slammed the door in NVR's face as it had been looking for revenue of $829.8 million and certainly didn't expect cancellation rates to rise from 16.3% from the 12.5% reported in the year-ago period.


Now what: Today's report is interesting in that NVR had been the one homebuilder that had escaped the downturn in housing relatively unscathed. Now, it appears that roles are reversing. Lennar (NYS: LEN) , D.R. Horton (NYS: DHI) , and PulteGroup (NYS: PHM) all reported lower cancellation rates in their most recent quarters with only KB Home (NYS: KBH) joining NVR in the increasing cancellation rate column. In spite of its strong profitability, just as I highlighted in May, I feel NVR has been and still is rather pricey, and I would use today as a reminder that things aren't as peachy in the housing sector as many would like to believe.

Craving more input? Start by adding NVR to your free and personalized watchlist so you can keep up on the latest news with the company.

The article Why NVR Shares Slid Off Their Foundation originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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