AXR Earnings Rise in Q3, Stock Declines Amid Land Sale Slowdown

Zacks Equity Research

Wed, Mar 12, 2025, 8:15 AM 4 min read

Financial Performance

AMREP reported third-quarter fiscal 2025 revenues of $7.5 million, marking a 40.7% decline from the $12.7 million a year ago. For the first nine months of fiscal 2025, total revenues increased 20.9% to $38.5 million from $31.8 million in the prior-year period.

Net income for the quarter was $0.7 million, or $0.13 per diluted share, up from $92,000, or $0.02 per diluted share, in the third quarter of fiscal 2024. For the first nine months of fiscal 2025, net income surged 246.5% to $8.8 million, or $1.64 per diluted share, from $2.5 million, or $0.48 per diluted share a year ago.

AMREP Corporation Price, Consensus and EPS Surprise

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Segmental Performance

AMREP operates in two main business segments — land development and homebuilding.

Land Sales: Revenues for this segment fell 27.9% to $2.9 million in third-quarter fiscal 2025 from $4 million a year ago. The decline was primarily driven by lower sales of developed residential and undeveloped land. For the nine-month period, land sale revenues increased 16.3% to $18.1 million from $15.6 million in the comparable period in fiscal 2024. This primarily resulted from an increase in revenues from the sale of developed residential land and undeveloped land. During the nine months ended Jan. 31, 2025, AXR sold 549 acres of contiguous undeveloped land in Sandoval County, NM, representing $2.5 million of revenue, to one purchaser.

Home Sales: This segment experienced a 57.2% revenue increase to $4.1 million in third-quarter fiscal 2025 from $2.6 million in third-quarter fiscal 2024. For the nine months, home sale revenues rose 93.3% to $18.4 million from $9.5 million. The changes in home sale revenues for the three and nine months ended Jan. 31, 2025, compared to the prior periods, were primarily due to an increase in the number of homes sold.

Other Revenue: This category, which includes landscaping services and rental income, saw a steep decline of 91.4% in third-quarter fiscal 2025, generating $0.5 million compared with $6.1 million in the prior-year period. The decrease was primarily due to the absence of investment asset sales, which had contributed $5.7 million to revenue in third-quarter fiscal 2024.

Cost Management and Profitability

Total costs and expenses for the quarter decreased 44.8% to $7.1 million from $12.8 million a year ago. This decline was mainly due to lower land sale costs, which fell 29.7% to $1.9 million, and a 97.1% plunge in other costs of revenues, reflecting the absence of commercial investment asset sales. Home sale costs increased 57.1% year over year to $3.2 million from $2 million, in line with higher home sales.

Gross margins in the land segment improved to 36% in the fiscal third quarter compared with 34% a year earlier, benefiting from changes in reimbursements and the location and mix of land sold. Homebuilding gross margins were 23%, up from 22% in the prior-year period despite increased material and labor costs.

AMREP remains financially stable, with $36.9 million in cash and cash equivalents as of Jan. 31, 2025, compared with $29.7 million as of April 30, 2024.

Management Commentary and Market Factors

Management acknowledged that the quarter’s land sale revenues were adversely impacted by a slowdown in municipal approvals, infrastructure availability and higher mortgage rates, which have affected housing affordability. In response, the company adjusted its strategy by offering sales incentives, reducing lot and home sizes and opportunistically leasing completed homes.

Despite these headwinds, the homebuilding segment showed resilience, benefiting from an increased number of homes sold. As of Jan. 31, 2025, AMREP had 101 homes in production, including 16 homes under contract, representing approximately $7.2 million in expected future revenues.

Guidance

AXR did not provide specific guidance for the remainder of fiscal 2025. However, management noted that reduced land development activity and delays in municipal approvals may lead to lower land sale revenues in fiscal 2026 compared with fiscal 2025. The housing affordability challenge remains a key concern, potentially limiting demand despite the company’s adjustments in pricing and product offerings.

Other Developments

During the nine months ended Jan. 31, 2025, AMREP sold 585.2 acres of undeveloped land in Sandoval County, contributing to increased revenues in the land segment. The company also expanded its residential leasing portfolio, with 15 homes leased to residential tenants as of Jan. 31, up from 10 homes as of April 30, 2024.

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