One pundit tracking the company believes it could choose better locales for development and construction.Homebuilder and land developer Green Brick Partners (GRBK -6.82%) was likely eager to reach the weekend. As of late Thursday night, according to data compiled by S&P Global Market Intelligence, its shares had tumbled by 17% week to date. An analyst's downgrade certainly didn't do the stock any favors.Scissor timeThat morning, Alex Rygiel of Texas Capital Securities reduced his Green Brick recommendation ...

Core Insights - The housing sector is facing significant challenges, with new housing starts declining to an annual pace of 1.3 million, which is below economists' expectations [2][3] - The median U.S. home price is projected to reach $416,900 by 2025, while the median household income is around $83,150, resulting in a price-to-income multiple of 5X, indicating severe affordability issues [4][7] - A housing shortage has reached an all-time high of 4.7 million units, exacerbating the crisis as younger buyers are priced out and older homeowners are not selling [8] Government Response - The White House is considering measures to address the high cost of housing, with potential actions including declaring a national housing emergency, providing tariff relief, and offering incentives for first-time buyers [9][10] - These combined measures could significantly boost both supply and demand in the housing market within a year, potentially leading to a housing boom [11] Investment Opportunities - Key homebuilders identified for investment include Lennar, PulteGroup, DR Horton, KB Home, NVR, Toll Brothers, Meritage Homes, and Green Brick Partners, referred to as "blue chips" of the housing construction industry [12] - Housing technology companies like Zillow are also highlighted as potential investment opportunities, especially if more buyers enter the market [12] Interest Rate Outlook - The Federal Reserve is expected to cut interest rates four to five times over the next year, which could lower mortgage rates significantly from the current range of 6-7% [15][17] - Lower mortgage rates could improve affordability for buyers but may also lead to increased demand and higher prices in a tight market [19] Additional Investment Considerations - Companies like Opendoor, Compass, and Rocket Mortgage are positioned to benefit from a potential housing boom and falling mortgage rates, with Rocket Mortgage expected to dominate the refinancing space [21]

Core Thesis - Green Brick Partners, Inc. (GRBK) operates a fundamentally different business model compared to its peers, focusing on in-house land ownership and development, which allows for higher margins and rapid growth [2][4]. Financial Metrics - As of September 11th, GRBK's share price was $75.25, with trailing and forward P/E ratios of 9.61 and 13.04 respectively [1]. - The company boasts a gross margin of 34%, significantly higher than the industry average of approximately 25% [2]. - GRBK has achieved a 34% annualized total shareholder return (TSR) since 2019, despite being priced at a near 7x NTM P/E, indicating a disconnect between its fundamentals and market valuation [3][4]. Strategic Advantages - The company's strategy of avoiding competitive lot auctions and optioned deals helps maintain a low land basis, protecting profitability amid rising option costs in the industry [3]. - GRBK has approximately ten years of lot supply and the potential to grow unit deliveries at a compound annual growth rate (CAGR) exceeding 25% [3]. - The company is projected to achieve a 40% internal rate of return (IRR) through 2029 under base case scenarios, reflecting its capital-efficient expansion strategy [3]. Market Position and Outlook - GRBK's disciplined capital allocation and low leverage profile enhance its attractiveness to investors, suggesting a favorable risk/reward scenario [4]. - There is growing attention on GRBK, with expectations that the market may eventually reprice the stock upward as its execution continues to improve [4].

Group 1 - Green Brick Partners, Inc. (NYSE:GRBK) has renewed its exclusive agreement with James Hardie Building Products Inc. for a 3-year term, ensuring Hardie® siding and trim products will be used in all new developments through 2028 [1][2] - The partnership emphasizes the commitment to distinctive housing developments and innovation, ensuring homes built by Green Brick Partners feature strength, durability, and design flexibility [2] - In Q2 2025, Green Brick Partners delivered 1,042 new homes, marking a 5.6% year-over-year increase and setting a record for any second quarter, demonstrating resilience in a softer housing market [2] Group 2 - Green Brick Partners is recognized as one of the best housing stocks to buy according to hedge funds, indicating strong market interest and potential investment opportunities [1] - The company is characterized as a diversified homebuilding and land development firm, showcasing its broad operational scope within the housing industry [3]

Group 1 - James Hardie Industries PLC is recognized as a top investment option in the cement sector, with a renewed partnership with Green Brick Partners extending through 2028 [1][2][3] - The exclusive agreement designates James Hardie's siding and trim products as the sole choice for new projects by Green Brick Partners, which is the third-largest homebuilder in the Dallas-Fort Worth area [2][3] - The collaboration emphasizes a shared commitment to quality and innovation in building durable homes, reinforcing the long-standing relationship between the two companies [3][4] Group 2 - James Hardie is a global leader in high-performance building materials, particularly known for its fiber cement siding and backer board products, which are durable and resistant to fire, water, and pests [4] - The company also offers a variety of exterior and interior solutions, including composite and PVC decking, as well as composite and gypsum fiber boards [4]

Industry Overview - Cement is a crucial material in the construction industry and serves as an essential indicator of economic growth, with demand increasing during infrastructure expansion efforts [1] - The US construction materials sector has risen over 23% this year, outperforming the S&P 500, which is up about 12% [1] Market Outlook - Analysts at JPMorgan predict continued momentum in the US construction and materials sector into the second half of the year and through 2026, with a 15% upside potential for sector stocks and a 20% gain for pure US construction stocks [2] - Increased construction volumes are anticipated in the latter half of the year, with 2Q likely being the trough for softer demand trends [2] - Interest rate cuts by the US Federal Reserve are expected to enhance affordability for home purchases and construction projects, further boosting demand for cement [2] Long-term Trends - Factors such as increasing urbanization, infrastructural development, and a shift towards sustainable building practices are expected to support the long-term outlook for cement stocks [3] Company Analysis: CEMEX, S.A.B. de C.V. - CEMEX is identified as one of the best cement stocks to buy, with a stock upside potential of 5.99% and 18 hedge fund holders [8] - The stock's price target was raised to $10 and $8.60 by BofA Securities, reflecting an updated discounted cash flow analysis based on 2026 projections [8] - CEMEX has seen a 53% increase in stock performance over the past six months, attributed to aggressive cost-saving measures and a focus on generating free cash flow [9] - The new CEO is committed to improving the company's return on invested capital and plans to invest $2 billion in disciplined mergers and acquisitions for growth opportunities [10] - CEMEX aims to provide innovative and sustainable building solutions, focusing on carbon neutrality and resource management [11] Company Analysis: James Hardie Industries PLC - James Hardie is recognized as a top cement stock with a stock upside potential of 36.96% and 32 hedge fund holders [12] - The company renewed its partnership with Green Brick Partners, enhancing collaboration in fiber-cement siding and exterior design solutions through 2028 [12][13] - This exclusive agreement positions James Hardie's products as the preferred choice for new Green Brick projects, reinforcing their commitment to quality and innovation [13][14] - James Hardie is a leader in high-performance building materials, known for its durable fiber cement siding and a range of other exterior and interior solutions [14]

Core Insights - James Hardie Building Products Inc. has renewed its exclusive partnership with Green Brick Partners, Inc. through 2028, ensuring that Hardiesiding and trim products will be the sole choice for new developments by Green Brick Partners [1][2][4] Company Overview - James Hardie is a subsidiary of James Hardie Industries plc and is recognized as the North American leader in fiber cement home siding and exterior design solutions [1][6] - Green Brick Partners is a prominent land development and homebuilding company operating in Texas, Georgia, and Florida, known for its strategic approach to homebuilding [2][8] Agreement Details - The new three-year agreement solidifies the collaboration between James Hardie and Green Brick Partners, emphasizing their shared commitment to quality and innovation in homebuilding [2][4] - This agreement ensures that all homes built by Green Brick will feature Hardiesiding and trim products, which are known for their durability and aesthetic appeal [4][3] Product Performance - Hardiesiding and trim products are recognized for their exceptional performance in various environmental conditions, being noncombustible and resistant to moisture and pests [3][5] - The products are engineered to withstand extreme weather while offering a wide range of colors and styles, reinforcing James Hardie's position as the 1 brand of siding in North America [3][6] Strategic Importance - The partnership highlights the importance of quality and innovation in the homebuilding industry, with both companies focusing on creating distinctive housing developments [4][2] - The collaboration is expected to enhance the overall quality of homes built by Green Brick Partners, aligning with their commitment to high-quality residential communities [3][4]

Financial Data and Key Metrics Changes - Net income attributable to Green Brick for Q2 2025 was $82 million, or $1.85 per diluted share, a decrease of 22% year over year [5][12] - Revenue for the quarter was virtually flat year over year at $547 million [6][11] - Homebuilding gross margins declined 410 basis points year over year to 30.4% [7][12] - Year-to-date net income decreased 16.8% to $157 million, and diluted earnings per share declined 15% to $3.52 [13] Business Line Data and Key Metrics Changes - Home closings increased by 6% year over year, totaling 1,042 homes [6] - Net new orders also increased by 6% year over year to 908, marking the highest for any second quarter in company history [6][12] - Average sales price declined by 5.3% year over year to $525,000 [11] - The average active selling communities remained relatively unchanged at approximately 102 [13] Market Data and Key Metrics Changes - Discounts and incentives increased as a percentage of residential unit revenue to 7.7% from 4.5% year over year [11] - The cancellation rate for the second quarter increased sequentially to 9.9% from 9.2% in the previous year [18] - The average FICO score for closed loans was 745, with a debt-to-income ratio of 38% [19][48] Company Strategy and Development Direction - The company is focused on maintaining an investment-grade balance sheet while navigating market volatility [8][15] - There is an emphasis on efficient cost controls, innovative home offerings, and targeted expansion in high-volume markets [8] - The expansion of the Trophy Signature Homes brand is a key strategic focus, with plans to enter the Houston market [9][22] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing affordability challenges due to high interest rates and decreasing consumer confidence [5][17] - The company remains optimistic about its ability to adapt to market conditions and maintain sales volumes [17][19] - Management believes that their investment-grade balance sheet provides a solid foundation for future growth [15][16] Other Important Information - The company returned $60 million of capital to shareholders through share repurchases, reducing outstanding shares by approximately 16% since 2022 [7] - The company plans to spend approximately $300 million on land development for the full year of 2025 [22] Q&A Session Summary Question: What is the incentive trajectory and expectations for July? - Management noted that incentives are currently around 8% and are seeing some leveling out, but conditions vary by neighborhood [26][27] Question: How much of the gross margin decline is due to price incentives versus mix? - Most of the gross margin decline was attributed to mortgage rate buy downs, with a small impact from mix [28][29] Question: What are the expectations for starts in the second half of the year? - Management indicated that starts will match sales, which have been consistent throughout the year [31][33] Question: How does the company view inventory levels today? - The company is focusing on finished homes, as buyers prefer to avoid uncertainty with mortgage rates [37] Question: What is the outlook on inventory levels among competitors? - Management observed little resale activity in their communities, indicating a stable demand for new homes [42][44]

Financial Performance - Home closings revenue remained unchanged year-over-year at $547 million[12, 13] - Closings increased by 56% year-over-year to 1,042 units, setting a company record[16, 17] - Homebuilding gross margins decreased by 410 bps year-over-year to 304%, but remained industry-leading[18, 20] - Net income was $819 million in Q2, resulting in a diluted EPS of $185[50] Orders and Backlog - Net new home orders increased by 62% year-over-year to 908, a record for any second quarter[28, 31] - Quarter-end backlog revenue was $516 million on 730 units[31] Land and Lot Position - Total lots owned and controlled increased by 207% year-over-year to 40,200, with 882% owned[33, 37] - The company invested $109 million in land acquisition and $139 million in land development year-to-date[37] - Land development spending in 2025 is expected to be approximately $300 million, a 46% increase from 2024[37] Financial Strength - The company ended the quarter with $112 million in cash and $365 million of capacity in revolving credit facilities[44] - The debt-to-total-capital ratio was 144%, the lowest level since 2015[50, 64]

PART I FINANCIAL INFORMATION [Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Green Brick Partners' unaudited condensed consolidated financial statements for Q2 and H1 2025, along with detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $2.32 billion, driven by real estate inventory, while liabilities decreased and equity grew Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total assets** | $2,315,269 | $2,249,994 | | Real estate inventory | $1,976,911 | $1,937,732 | | Cash and cash equivalents | $112,459 | $141,543 | | **Total liabilities** | $520,367 | $551,831 | | Senior unsecured notes, net | $274,281 | $299,090 | | **Total equity** | $1,748,935 | $1,653,454 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 revenues slightly decreased to $549.1 million, with net income at $81.9 million, while H1 2025 revenues increased to $1.05 billion, but net income declined to $157.0 million Financial Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | 6M 2025 | 6M 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $549,147 | $560,631 | $1,046,768 | $1,007,969 | | **Total gross profit** | $167,514 | $189,666 | $323,299 | $337,923 | | **Net income attributable to Green Brick** | $81,948 | $105,358 | $157,007 | $188,659 | | **Diluted EPS** | $1.85 | $2.32 | $3.52 | $4.14 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity increased to $1.73 billion by June 30, 2025, driven by net income, partially offset by stock repurchases and dividends - For the six months ended June 30, 2025, the company recorded net income of **$157.0 million**, repurchased **$60.8 million** of its stock, and paid **$1.4 million** in dividends[12](index=12&type=chunk) - The company retired **1,027,678 shares** of treasury stock during the first six months of 2025[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations significantly increased to $143.5 million for H1 2025, while investing and financing activities resulted in a net cash decrease of $13.9 million Net Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $143,460 | $3,179 | | **Net cash (used in) provided by investing activities** | $(25,600) | $58,148 | | **Net cash used in financing activities** | $(131,763) | $(102,610) | | **Net decrease in cash** | $(13,903) | $(41,283) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details accounting policies and financial data, covering inventory, debt, equity, revenue recognition, segment performance, and subsequent events - Total inventory increased to **$1.98 billion** as of June 30, 2025, with no impairment charges recorded in 2025 or 2024[26](index=26&type=chunk) - On February 17, 2025, the Board authorized a new **$100.0 million** stock repurchase program, under which **1,027,678 shares** were repurchased for approximately **$60.1 million** during H1 2025[49](index=49&type=chunk)[51](index=51&type=chunk) - On July 4, 2025, the "One Big Beautiful Bill Act" (OBBBA) was signed into law, and the company is evaluating its financial statement impact[73](index=73&type=chunk)[93](index=93&type=chunk) Disaggregation of Revenue - Six Months Ended June 30, 2025 (in thousands) | Primary Geographical Market | Residential units revenue | Land and lots revenue | | :--- | :--- | :--- | | Central | $783,215 | $4,342 | | Southeast | $259,211 | $— | | **Total revenues** | **$1,042,426** | **$4,342** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance for Q2 and H1 2025, covering home deliveries, sales prices, gross margins, new orders, backlog, land sales, expenses, liquidity, and capital resources [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q2 2025 saw increased home deliveries but flat residential revenue due to lower average sales prices and decreased gross margins, with similar trends for H1 2025 Key Operating Metrics vs. Prior Year Period | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Home deliveries | +5.6% | +8.0% | | Home closings revenue | 0.0% | +5.3% | | Avg. sales price of homes delivered | -5.3% | -2.5% | | Net new home orders | +6.2% | +4.6% | | Homebuilding gross margin % | -410 bps | -320 bps | - The decrease in residential units gross margin for both periods is attributed to higher incentives, discounts, and closing costs[105](index=105&type=chunk)[116](index=116&type=chunk) - Backlog revenue decreased by **20.6%** year-over-year to **$516.2 million** as of June 30, 2025[101](index=101&type=chunk)[103](index=103&type=chunk) - The cancellation rate remained low, at **9.9%** for Q2 2025 and **7.9%** for the six months ended June 30, 2025[104](index=104&type=chunk)[115](index=115&type=chunk) [Lots Owned and Controlled](index=30&type=section&id=Lots%20Owned%20and%20Controlled) The company owned and controlled 40,200 lots as of June 30, 2025, with 88.2% owned and 98.4% self-developed, reflecting its land strategy Total Lots Owned and Controlled | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total lots owned | 35,468 | 32,716 | | Total lots controlled | 4,732 | 5,115 | | **Total lots owned and controlled** | **40,200** | **37,831** | - Self-developed lots represent **98.4%** of the total lots owned and controlled as of June 30, 2025[127](index=127&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $112.5 million cash and low debt-to-capitalization ratios of 14.4% (gross) and 9.4% (net), sufficient for future operations and growth - As of June 30, 2025, the company had **$112.5 million** of unrestricted cash and cash equivalents[128](index=128&type=chunk) - The debt to total capitalization ratio was **14.4%** as of June 30, 2025, with a target of up to approximately **20%** for growth capital[131](index=131&type=chunk)[132](index=132&type=chunk) - The net debt to total capitalization ratio, a non-GAAP measure, was **9.4%** as of June 30, 2025[132](index=132&type=chunk)[147](index=147&type=chunk) - As of June 30, 2025, the company had no amounts outstanding under its **$35.0 million** Secured Revolving Credit Facility or its **$330.0 million** Unsecured Revolving Credit Facility[136](index=136&type=chunk)[137](index=137&type=chunk) - As of June 30, 2025, the company had earnest money deposits of **$10.2 million** at risk for contracts to purchase **3,221 lots** with an aggregate price of approximately **$217.7 million**[151](index=151&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[155](index=155&type=chunk) - No material changes were made to the company's internal control over financial reporting during the three months ended June 30, 2025[156](index=156&type=chunk) PART II OTHER INFORMATION [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section highlights updated risk factors, including the adverse effects of tariffs on building material costs and home demand, and dependency on mortgage financing availability - The company identifies a risk that recently enacted and potential future tariffs could increase building product costs and adversely affect home demand and margins[157](index=157&type=chunk) - The U.S. Department of Commerce has indicated it will more than double duties on Canadian softwood lumber imports by September 2025, potentially increasing lumber costs[157](index=157&type=chunk) - Recent updates to residency requirements for FHA or VA insured mortgages, now limited to permanent U.S. residents, could adversely impact some homebuyers' ability to obtain financing[159](index=159&type=chunk)[160](index=160&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during Q2 2025, totaling 744,857 shares for $43.4 million under its $100 million repurchase plan Share Repurchases - Q2 2025 | Period | Total shares purchased | Average price paid per share | | :--- | :--- | :--- | | April 2025 | 384,857 | $55.97 | | May 2025 | 360,000 | $60.67 | | June 2025 | — | — | | **Total** | **744,857** | | - As of June 30, 2025, **$39.9 million** remained available for repurchase under the company's **$100 million** stock repurchase plan[161](index=161&type=chunk) [Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section reports no Rule 10b5-1 trading arrangement changes and details the employment agreement for Executive Vice President - Land, Bobby Samuel - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[162](index=162&type=chunk) - On May 12, 2025, the Company entered into a three-year employment agreement with Bobby Samuel, Executive Vice President - Land, with an annual base salary of **$500,000** and a target annual bonus of at least **$500,000**[163](index=163&type=chunk)[164](index=164&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including employment agreements, CEO and CFO certifications, and XBRL data files - Exhibits filed include the employment agreement for Bobby L. Samuel III, Sarbanes-Oxley Act certifications from the CEO and CFO, and XBRL interactive data files[167](index=167&type=chunk)