NVR, Inc., Reston, Va. (NYSE: NVR) on Thursday morning reported net income for its third quarter ended September 30, 2017 of $162,102,000, or $38.02 per diluted share, a 38% jump from the same quarter last year. The results beat analyst estimates of $35.77 per share.
Consolidated revenues for the third quarter of 2017 totaled $1,667,920,000, an 8% increase from $1,537,569,000 in the third quarter of 2016.
New orders in the third quarter of 2017 increased 21% to 4,200 units, when compared to 3,477 units in the third quarter of 2016. The average sales price of new orders in the third quarter of 2017 was $382,800, a decrease of 3% when compared with the third quarter of 2016. The decrease in the average sales price of new orders is primarily attributable to a shift in new orders to lower priced markets and lower priced products. Settlements increased in the third quarter of 2017 to 4,158 units, 6% higher than the third quarter of 2016. The Company’s backlog of homes sold but not settled as of September 30, 2017 increased on a unit basis by 16% to 8,855 units and increased on a dollar basis by 15% to $3,418,710,000 when compared to September 30, 2016.
Home building revenues in the third quarter of 2017 totaled $1,633,726,000, 8% higher than the year earlier period. Gross profit margin in the third quarter of 2017 increased to 19.9%, compared to 17.6% in the third quarter of 2016. Gross profit margin was favorably impacted by modest improvement in pricing combined with moderating construction costs. Income before tax from the home building segment totaled $226,043,000 in the third quarter of 2017, an increase of 35% when compared to the third quarter of 2016.
Mortgage closed loan production in the third quarter of 2017 totaled $1,115,494,000, an increase of 6% when compared to the third quarter of 2016. Income before tax from the mortgage banking segment totaled $18,421,000 in the third quarter of 2017, an increase of 6% when compared to the third quarter of 2016.
Net income and diluted earnings per share were favorably impacted by the reduction in the company’s effective tax rate for the three and nine months ended September 30, 2017 to 33.7% and 29.5%, respectively, compared to 36.5% and 36.6% for the three and nine months ended September 30, 2016, respectively. The reduction in the effective tax rate was primarily due to the company’s January 1, 2017 adoption of Accounting Standard Update 2016-09, which resulted in the Company recognizing an income tax benefit of $8,357,000 and $44,720,000 related to excess tax benefits from stock option exercises during the three and nine months ended September 30, 2017, respectively. For the three and nine months ended September 30, 2016, the excess tax benefits of $2,271,000 and $10,949,000, respectively, were recorded to additional paid-in capital within shareholders’ equity on the consolidated balance sheet. Excluding the impact of the excess tax benefits recognized during the three and nine months ended September 30, 2017, the effective tax rate would have been 37.1% for both periods. Additionally, the excess tax benefits recognized during the three and nine months ended September 30, 2017 favorably impacted diluted earnings per share by $1.96 and $10.65 per share, respectively.
