Century Communities’ Earnings Call: Challenges and Growth

Century Communities, Inc ((CCS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Century Communities Faces Challenges Amid Stable Margins and Growth

Century Communities, Inc. recently held its first-quarter 2025 earnings call, revealing a mixed sentiment. While the company has successfully maintained stable gross margins and increased its community count, it faces significant challenges due to lower absorption rates, decreased home sales revenue, and increased incentive levels. These issues, driven by economic uncertainties and interest rate volatility, have led to a reduction in full-year guidance, highlighting a challenging market environment.

Stable Homebuilding Gross Margins

Century Communities reported stable homebuilding gross margins of 20.1%, excluding purchase price accounting, with only an 80 basis point sequential decline. This stability in margins is a positive indicator amidst the broader market challenges.

Community Count Growth

The company ended the first quarter with a community count of 318, marking a 26% increase year-over-year. This growth is expected to continue, with a mid-single-digit percentage increase projected by the end of 2025.

Successful Cost Management

Century Communities has effectively managed costs, keeping direct construction and finished lot costs roughly flat on a sequential basis. Notably, there was a 4% decline in direct construction costs year-over-year, showcasing the company’s efficient cost management strategies.

Recognition for Trustworthiness

For the third consecutive year, Century Communities was recognized on Newsweek’s list of America’s most trustworthy companies. This accolade underscores the company’s commitment to quality and reliability.

Lower Absorption Rates and Consumer Confidence

The first quarter saw lower than expected absorption rates due to economic uncertainty, interest rate volatility, and declining consumer confidence. These factors have led to elongated sales cycles, impacting overall performance.

Decline in Home Sales Revenue

Home sales revenues for the first quarter were $884 million, a 4% decrease compared to the previous year. This decline was primarily due to lower deliveries and a decrease in the average sales price.

Increased Incentive Levels

Incentives on closed homes rose to approximately 900 basis points in the first quarter, up from about 800 basis points in the fourth quarter of 2024. This increase has impacted gross margins, adding to the company’s challenges.

Reduced Full-Year Guidance

Ongoing economic uncertainty and declining consumer confidence have led Century Communities to reduce its full-year home delivery guidance to 10,400 to 11,000 homes, with anticipated home sales revenue of $4 to $4.2 billion. This adjustment reflects the challenging market conditions the company is navigating.

Forward-Looking Guidance

Despite the headwinds, Century Communities provided forward-looking guidance during the earnings call. The company delivered 2,284 homes, only 3% below the previous year, with a slight decline in average sales price. Net new contracts reached 2,692 homes, a 6% decrease from the prior year but a 33% increase over the first quarter of 2023. Century Communities forecasts second-quarter deliveries of 2,300 to 2,500 homes, with gross margins expected to ease due to increased incentives. The company plans to grow deliveries by approximately 10% annually, leveraging its lot pipeline.

In conclusion, Century Communities is navigating a challenging market environment with a mix of stable margins and growth opportunities, countered by economic uncertainties and declining consumer confidence. The company’s ability to manage costs and maintain trustworthiness is commendable, yet the reduction in full-year guidance highlights the hurdles ahead. Investors and stakeholders will be keenly watching how Century Communities adapts to these evolving market dynamics.