CVCO - Cavco Industries: Uncertain Housing Market Due To High Rates And Low Inventory

2024-07-01 06:56:19 ET

Summary

• CVCO's net revenue fell in FY2024 due to lower sales volume and selling prices in its factory-built housing segment.
• The US manufactured housing industry saw a decline in annual shipments in 2023 due to a rising interest rate environment, creating headwinds for CVCO in the short term.
• CVCO provides affordable factory-built housing solutions amidst US housing affordability issues, but its uncertain outlook and lack of margin of safety warrant a hold rating.

Synopsis

Cavco Industries ( CVCO ) designs and manufactures factory-built homes. Based on reported wholesale shipments, it is one of the largest manufacturers of manufactured homes in the US. For FY2024, CVCO’s net revenue fell due to a decline in its factory-built housing segment, which reported lower sales volume and selling prices. Profitability margins also contracted slightly due to increasing SG&A expenses as a percentage of net revenue and contracting gross profit margins.

In 2023, the US manufactured housing industry's annual shipments decreased due to a rising interest rate environment. The current interest rate environment is looking uncertain as well due to persistent inflation. Therefore, this uncertainty is expected to create headwinds for CVCO in the short term....

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