Core Viewpoint - Green Brick Partners reported quarterly earnings of $1.77 per share, exceeding the Zacks Consensus Estimate of $1.43 per share, but down from $1.98 per share a year ago, indicating a +23.78% earnings surprise [1] Financial Performance - The company achieved revenues of $499.09 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 9.93%, although this is a decrease from $523.66 million in the same quarter last year [2] - Over the last four quarters, Green Brick Partners has exceeded consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Performance - Green Brick Partners shares have increased approximately 18.3% since the beginning of the year, compared to a 17.2% gain for the S&P 500 [3] Future Outlook - The company's earnings outlook will be crucial for determining the stock's immediate price movement, with current consensus EPS estimates at $1.45 for the upcoming quarter and $6.40 for the current fiscal year [4][7] - The estimate revisions trend for Green Brick Partners was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Building Products - Home Builders industry, to which Green Brick Partners belongs, is currently ranked in the bottom 20% of over 250 Zacks industries, which may impact stock performance [8]

Home Deliveries and Closings - Home deliveries decreased by 0.3% to 953 units in Q3 2025 compared to Q3 2024, while new homes delivered increased by 5.1% to 2,905 units for the nine months ended September 30, 2025 [99][112]. - Home closings revenue for Q3 2025 was $499.1 million, a decrease of 4.6% from $522.9 million in Q3 2024, while for the nine months it increased by 1.9% to $1.54 billion [100][112]. - Net new home orders increased by 2.4% to 898 in Q3 2025 and by 3.9% to 2,912 for the nine months ended September 30, 2025 [101][113]. - The cancellation rate improved to 6.7% in Q3 2025 from 8.5% in Q3 2024, maintaining a historically low range under 10% since December 31, 2022 [104][114]. Sales Prices and Revenue - The average sales price of homes delivered decreased by 4.2% to $523.7 thousand in Q3 2025, and by 3.1% to $530.6 thousand for the nine months ended September 30, 2025 [100][112]. - Lots revenue decreased by $1.3 million to $4.342 million for the nine months ended September 30, 2025, a decline of 23.1% compared to $5.644 million in 2024 [117]. - Land revenue dropped to $0 from $12.704 million in the prior year, marking a 100% decrease [117]. - Total land and lots revenue fell to $4.342 million, down 76.3% from $18.348 million in 2024 [117]. - The average sales price of lots closed increased by 44.8% to $103.4 thousand from $71.4 thousand in the previous year [117]. Expenses and Income - Selling, general and administrative expenses increased to $58.1 million in Q3 2025, with a percentage of revenue rising to 11.6% from 11.0% in Q3 2024 [106][107]. - Selling, general and administrative expenses rose to $172.807 million, an increase of 4.3% from $165.912 million in 2024, with a percentage of revenue increase from 10.8% to 11.2% [118]. - Other income increased to $8.9 million in Q3 2025, up from $4.2 million in Q3 2024, driven by higher loan origination volume [110]. - Other income, net, decreased to $17.7 million from $25.4 million, primarily due to a $10.7 million gain on the sale of an investment in 2024 [122]. - Income tax expense for Q3 2025 was $23.2 million, slightly up from $23.1 million in Q3 2024 [111]. - Income tax expense decreased to $68.4 million from $71.8 million, reflecting lower taxable income [123]. Financial Position and Ratios - Backlog revenue decreased by 20.0% year-over-year to $465.6 million as of September 30, 2025, with backlog units down 16.6% to 675 [101][103]. - Residential units gross margin for Q3 2025 decreased by 160 basis points to 31.1%, primarily due to higher incentives and closing costs [105][116]. - The debt to total capitalization ratio was approximately 15.8% as of September 30, 2025, with a net debt to total capitalization ratio of 9.8% [131][132]. - As of September 30, 2025, the company had a Consolidated Tangible Net Worth of $1,803.3 million, exceeding the minimum requirement of approximately $1,129.4 million [30]. - The company's interest coverage ratio was 32.32 to 1.0 as of September 30, 2025, significantly above the minimum requirement of 2.0 to 1.0 [30]. - The maximum debt to total capitalization rolling average ratio was 15.3% as of September 30, 2025, well below the maximum limit of 40.0% [30]. - The net debt to total capitalization ratio was 9.8% as of September 30, 2025, compared to a debt to total capitalization ratio of 15.8% [149]. Assets and Liabilities - The company issued $75.0 million of senior unsecured notes in August 2019, with a principal payment schedule of $12.5 million due in 2024 and 2025, and a final payment of $50.0 million due in 2026 [30]. - As of September 30, 2025, the company had an outstanding balance of $14,557 thousand under its warehouse facilities, which have a maximum aggregate commitment of $80.0 million [142]. - The company had earnest money deposits of $10.2 million at risk associated with contracts to purchase 2,879 total lots, with an aggregate purchase price of approximately $206.3 million [153]. - The company has warehouse facilities secured by underlying mortgage loans, with interest rates based on SOFR plus a margin of 1.75% to 2% [143]. - Total lots owned increased to 36,699 as of September 30, 2025, from 32,716 at the end of 2024, representing an increase of 12.1% [127]. Industry Trends - The homebuilding industry experiences seasonal fluctuations, with the highest new home order activity typically occurring in spring and summer [154].

Financial Performance - Diluted EPS for Q3 2025 was $1.77, with net income of $78 million, a decrease of 12.6% year-over-year [5] - Home closings revenue totaled $499 million, down 4.7% from $523 million in Q3 2024 [4] - Residential units revenue for the three months ended September 30, 2025, was $499,091,000, a decrease of 4.5% compared to $522,859,000 in 2024 [13] - Home closings revenue for the nine months ended September 30, 2025, increased to $1,541,485,000, up 1.9% from $1,512,901,000 in 2024 [13] - Adjusted homebuilding gross margin for the three months ended September 30, 2025, was $153,000,000, with a margin percentage of 30.7%, down from 33.5% in 2024 [21] Home Sales and Orders - New home orders reached 898, up 2.4% year-over-year, marking a record for any third quarter in the company's history [3] - New homes delivered were 953, slightly down by 0.3% compared to 956 in Q3 2024 [4] - Net new home orders for the three months ended September 30, 2025, were 898, representing a 2.4% increase from 877 in 2024 [13] - Revenue from net new home orders decreased to $448,465,000 for the three months ended September 30, 2025, down 1.3% from $454,358,000 in 2024 [13] Backlog and Construction - The backlog revenue decreased by 20.0% year-over-year to $465.6 million [5] - Backlog revenue as of September 30, 2025, was $465,589,000, a decrease of 20.0% from $581,848,000 in 2024 [13] - Homes under construction decreased by 5.5% year-over-year to 2,202 units [5] - Average sales price of backlog decreased to $689,800 as of September 30, 2025, down 4.1% from $719,200 in 2024 [13] Pricing and Margins - The average sales price of homes delivered was $523.7 thousand, down 4.2% from $546.9 thousand in Q3 2024 [5] - Average sales price of homes delivered decreased to $523,700 for the three months ended September 30, 2025, down 4.2% from $546,900 in 2024 [13] - Homebuilding gross margins were 31.1%, remaining above 30% for the tenth consecutive quarter [3] Land and Development Strategy - The company has broken ground on its first master-planned community in the Houston market, anticipating sales to begin in the spring selling season [3] - Total lots owned increased to 36,699 as of September 30, 2025, compared to 32,716 as of December 31, 2024 [15] - Total lots controlled, including lots under option, was 41,186 as of September 30, 2025, up from 37,831 as of December 31, 2024 [18] - The company is focused on an infill-focused land self-development strategy, aiming to adapt to evolving market conditions and adjust pricing to meet market demand [24] - Green Brick plans to expand its Trophy brand in Austin and Houston, which is expected to positively impact future results [24] - The company is investing in land, lots, and development for 2025, indicating a commitment to growth despite potential market headwinds [24] Risks and Strategic Focus - The company faces risks including increasing interest rates, inflation, and potential shortages of raw materials, which could impact demand and operational costs [24] - Green Brick emphasizes the importance of managing costs and cycle times to deliver efficient and cost-effective growth [24] - The company retains interests in related financial services platforms, which contribute to its overall business model [22] - Green Brick's geographic concentration in Texas, Georgia, and Florida presents both opportunities and risks in its operational strategy [24] - The company has a proactive approach to capital deployment to maximize shareholder returns as the housing market improves [24] Expansion and Services - Green Brick is expanding its financial services through Green Brick Mortgage and Green Brick Insurance, enhancing its overall service offerings [24] - Green Brick Partners, Inc. operates as the third largest homebuilder in Dallas-Fort Worth, with a diversified portfolio including five subsidiary homebuilders in Texas and interests in Georgia and Florida [22]

Core Insights - Greenlight Capital's funds returned -3.6% in Q3 2025, underperforming the S&P 500 index which returned 8.1% [1] - Year-to-date, the fund returned 0.4% compared to the S&P 500's 14.8% [1] Company Summary: Green Brick Partners, Inc. (NYSE:GRBK) - Green Brick Partners, Inc. is a homebuilding and land development company with a market capitalization of $2.948 billion as of October 27, 2025 [2] - The stock experienced a one-month return of -7.79% and a 52-week loss of 11.66% [2] - Greenlight Capital noted a 17% increase in the price of gold contributed positively to performance, while Green Brick Partners also advanced 17%, though gains were offset by a housing hedge [3] Hedge Fund Interest - Green Brick Partners is not among the 30 most popular stocks among hedge funds, with 18 hedge fund portfolios holding the stock at the end of Q2 2025, down from 22 in the previous quarter [4] - While acknowledging the potential of Green Brick Partners, the company believes certain AI stocks present greater upside potential and less downside risk [4]

Core Viewpoint - Green Brick Partners has experienced a significant decline in stock price, dropping 17% week to date, influenced by an analyst downgrade from buy to hold [1][2]. Group 1: Analyst Downgrade - Alex Rygiel of Texas Capital Securities downgraded Green Brick's recommendation from buy to hold, setting a price target of $71 per share [2]. - The downgrade was based on revised estimates for Green Brick's performance in 2025 and concerns over its geographic mix, particularly in weaker markets in Texas [3]. Group 2: Market Context - The bearish outlook from the analyst comes despite expectations of Federal Reserve rate cuts, which typically encourage construction activity by lowering borrowing costs [3]. - Green Brick Partners is scheduled to release its third-quarter results on October 29, which will provide further insights into the company's performance [4].

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]