Shares of AMREP Corporation AXR have lost 6.8% since the company reported its earnings for the quarter ended Oct. 31, 2024, underperforming the S&P 500 Index’s 3.7% decline over the same period. Over the past month, AXR shares have plunged 9.1% compared with the 4.7% loss of the S&P 500, reflecting broader challenges in the company’s operational environment.
Revenue and Earnings Growth
AMREP reported total revenues of $11.9 million for the three months ended Oct. 31, 2024, a 34.5% year-over-year increase from $8.9 million. This growth was driven by a 19.9% rise in land sale revenues (totaling $5.9 million) and a robust 51.5% surge in home sale revenues (which reached $5.3 million), supported by higher sales volumes and pricing dynamics.
The company posted net income of $4 million, or $0.75 per diluted share, compared with $1.1 million, or $0.21 per diluted share, in the same period last year. Operating income rose 199.1% year over year to reach $3.1 million, while the homebuilding segment particularly benefited from a 104.9% increase in other cost of revenues due to expanded landscaping services.
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Other Key Business Metrics
The land development segment saw a revenue increase of 29.9% to reach $7.7 million, with a notable sale of 549 acres of contiguous undeveloped land in Sandoval County, NM, contributing $2.5 million to one purchaser. Homebuilding revenues increased 43.4% to $4.2 million, underpinned by the sale of 12 homes in second-quarter fiscal 2025 compared with seven in the prior-year quarter. However, the average selling price per home declined to $444,000 in second-quarter fiscal 2025 from $503,000 in the year-ago period due to changes in the location, mix and size of homes sold.
Land sale gross margins improved to 60% in second-quarter fiscal 2025 from 27% a year earlier, reflecting changes in public improvement district reimbursements, private infrastructure covenant reimbursements and payments for impact fee credits and the location, size and mix of property sold. Conversely, home sale gross margins declined from 29% in second-quarter fiscal 2024 to 20% in second-quarter fiscal 2025 due to the location, size and mix of homes sold and increases in the prices of building materials and skilled labor.
Operating income surged to $3.1 million in second-quarter fiscal 2025, up 199.1% from $1.1 million a year ago, reflecting robust top-line growth. The company also reported $0.6 million in net interest income, up 253.4% compared with $0.2 million in the prior-year period. General and administrative expenses increased 18% to $1.8 million in second-quarter fiscal 2025, primarily due to expanded homebuilding operations and higher equipment costs.
As of Oct. 31, 2024, AMREP reported $40.6 million in cash and equivalents, a substantial increase from $30.2 million as of April 30, 2024. The company reported operating cash flows of $10.5 million in second-quarter fiscal 2025 compared with $1.9 million in the year-ago period, driven by inventory reductions, which supported this growth. Capital expenditures during the quarter were modest at $120,000, reflecting strategic restraint in new project initiations amid market uncertainties.
AMREP Corporation Price, Consensus and EPS Surprise
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Management Commentary
Management attributed the strong revenue growth to a higher number of land and home sales and emphasized their focus on managing costs amid rising material and labor expenses. They noted delays in municipal approvals and infrastructure availability as ongoing challenges, which could affect future project timelines. To address affordability challenges, the company is offering sales incentives and reducing the size of lots and homes.
Guidance and Market Outlook
Although no specific guidance was provided, management highlighted the potential for reduced land sale revenues in fiscal 2025 due to market headwinds and delays in entitlement processes. Rising mortgage rates and inflation were cited as factors negatively impacting housing demand. To mitigate these challenges, the company plans to strategically manage its project pipeline and maintain flexibility in its development activities.
Other Developments
The company reported a reduction in real estate inventory, which decreased 3.9% to $63.4 million as of Oct. 31, 2024, from $65.9 million as of April 30, 2024, primarily due to land and home sales. Investment assets rose 3.4% to $12.9 million as of Oct. 31, 2024, from $12.6 million as of April 30, 2024, reflecting additional properties leased to residential tenants.
Additionally, AMREP’s pension plan termination resulted in a $1.2 million reclassification of income tax benefits, enhancing the quarter’s net income. Additionally, AMREP sold 585.2 acres of undeveloped land categorized as investment assets for the six months ended Oct. 31, 2024, generating incremental cash flow.
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