Shares of AMREP Corporation AXR have lost 4.4% since the company reported its earnings for the quarter ended April 30, 2025, underperforming the S&P 500 Index, which rose 0.2% during the same period. Over the past month, however, AMREP shares have gained 2.9%, slightly lagging the S&P 500’s 3.1% growth.
AMREP’s Financial Performance Review
AMREP posted strong earnings growth for fiscal 2025 despite a slight decline in annual revenues. Net income surged 90.1% to $12.7 million, or $2.37 per diluted share, from $6.7 million, or $1.25 per share, in fiscal 2024. However, revenues fell 3.3% to $49.7 million from $51.4 million due to a 61.9% dip in other revenues, which offset a 23.6% rise in home sale revenues.
Fourth-quarter fiscal 2025 net income came in at $3.9 million, or $0.73 per share, compared $4.1 million, or $0.77 per share, in the year-ago quarter. Revenues for the quarter declined 42.8% to $11.2 million from $19.5 million a year earlier, reflecting reduced high-value transactions. Despite this, fourth-quarter fiscal 2025 operating income remained robust at $3.5 million, down 24.3% from $4.7 million in the prior-year period.
AXR’s Segmental Breakdown
Land sales for the full fiscal year decreased 4.4% to $25.6 million from $26.8 million. This reflected a reduced volume of high-priced undeveloped land sales, which had previously been bolstered by a one-time $7.2 million transaction in Brighton, CO, in fiscal 2024. Still, AMREP sold 719 acres in fiscal 2025, significantly up from the 252 acres sold the previous year, though at lower revenue per acre due to mix effects.
Home sale revenue rose 23.6% to $21.2 million from $17.2 million, driven by a higher number of closings (50 homes versus 36 in the prior year), even as average selling prices fell 10.9% from $477,000 to $425,000. Other revenues, which include landscaping services and rental income, declined 61.9% to $2.8 million from $7.4 million, primarily due to the absence of investment property sales.
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AMREP’s Other Key Business Metrics
Land sale cost of revenues dropped 28.2% to $12.4 million from $17.2 million. Gross profit margins improved in the land segment, with land sale gross margin increasing to 52% in fiscal 2025 from 36% in the prior year. This was supported by higher reimbursements from public improvement districts and impact fee credits. In contrast, homebuilding margins compressed to 21% in fiscal 2025 from 25% due to elevated costs (29.9%), increased incentives, and a shift toward smaller homes.
General and administrative expenses rose 5.9% to $7.3 million from $6.9 million. The rise was mainly attributable to expanded homebuilding operations and IT costs, partially offset by lower corporate spending following the termination of AXR’s pension plan. Interest income surged 97.1% to $1.6 million from $0.8 million due to increased holdings of U.S. government securities.
AXR’s Management Commentary
Management acknowledged delays in municipal approvals and utility access, which affected construction timelines and delivery schedules. Affordability pressures, stemming from elevated home prices and mortgage rates, led the company to scale back on the scope of development projects and to provide incentives to sustain demand. This strategic moderation is expected to result in lower revenues from developed residential land sales in fiscal 2026.
Despite these headwinds, AMREP ended the year with 88 homes under production, including 28 under contract, representing approximately $12.8 million in expected revenues. This is up from 64 homes in production (20 under contract) at the same point last year, indicating an improving sales pipeline heading into fiscal 2026.
Factors Influencing AMREP’s Headline Numbers
The revenue decline in fiscal 2025 was primarily attributable to lower undeveloped land sales and the lack of investment asset divestitures, which had provided a revenue boost in fiscal 2024. Operating income for the year still rose 59.3% to $12.1 million from $7.6 million, owing to strong margin performance and effective cost management. Cost of revenues fell 17.9% to $30.3 million from $36.9 million, reflecting reduced construction and land acquisition outflows.
For the fiscal fourth quarter specifically, both revenue and net income declined year over year. The 42.8% drop from $19.5 million to $11.2 million in revenue was sharp, and net income slipped 6.1% to $3.9 million from $4.1 million.
AMREP also recorded a $1.2 million tax benefit resulting from the reclassification of pension-related accumulated other comprehensive income, which lowered its effective tax rate.
Operating cash flow remained strong at $10.2 million at the end of fiscal 2025 compared with $10.7 million at the end of fiscal 2024, and the company ended fiscal 2025 with $39.9 million in cash and cash equivalents and restricted cash compared with $30.2 million at the end of fiscal 2024.
AXR’s Guidance
While no formal financial guidance was issued, management cautioned that a decline in developed land sales is likely in fiscal 2026. This is tied to fewer active development projects and infrastructure bottlenecks. Nevertheless, AMREP believes it is well-positioned to weather near-term volatility, supported by its year-end cash and equivalents.
AMREP’s Other Developments
During fiscal 2025, AMREP expanded its leasing strategy in response to slower homebuyer activity. As of April 30, 2025, the company had 21 homes under lease, up from 10 in the prior year. This marks a significant step in diversifying revenue sources. There were no material acquisitions or divestitures disclosed during the quarter, aside from regular land transactions.
AXR terminated its defined benefit pension plan, transferring $547,000 in residual assets to its 401(k) plan. This action simplifies the balance sheet and eliminates long-term pension obligations. Of that amount, $92,000 was used for the 2024 employer contribution.
AMREP’s investment assets also grew during the year, with leased real estate holdings increasing to $6 million from $3.4 million, driven by the expansion of its residential rental portfolio.
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This article originally published on Zacks Investment Research (zacks.com).