Century Communities, Inc. CCS

The company reported strong order activity in Q2 FY26, with net orders increasing 10% sequentially, primarily driven by improved absorption rates. This sales strength was achieved alongside a continued decline in incentives, which averaged 1,200 basis points on closed homes, representing a 50 basis point reduction from Q1 FY26 levels. Management noted that order activity remained consistent throughout the quarter.

Century Communities ended the second quarter with a record 330 open communities, marking a 4% sequential increase. The average community count for Q2 was 321. The company anticipates its average community count for the full year 2026 to increase in the low to mid-single-digit percentage range year-over-year, supporting future growth.

The company successfully implemented initiatives that led to a 5% sequential decline in direct construction costs on delivered homes. Operational efficiency also improved, with cycle times averaging a record low of 112 calendar days, a reduction both year-over-year and sequentially. Finished lot costs remained flat on a sequential basis, contributing to cost control.

Adjustable Rate Mortgages (ARMs) played an increasingly significant role, accounting for nearly 35% of mortgage originations by volume in Q2 FY26. This marks a notable increase from approximately 30% in Q1 FY26 and less than 5% in Q1 FY25, indicating growing buyer receptivity to ARMs as a tool to address affordability challenges in the market.

Century Communities continued its balanced capital allocation strategy, repurchasing 1% of its shares outstanding in Q2 FY26 for $20 million at an average price of $55.54, representing a 38% discount to book value. Year-to-date, the company has repurchased 3% of shares outstanding for $60 million at a 32% discount to book value, while also maintaining its quarterly cash dividend.

The company ended the quarter with over 60,000 owned and controlled lots, actively managing its land position with owned lots down 2% sequentially but total lot count up 3%. Land acquisition and development spend for 2026 is projected between $1 billion and $1.2 billion, with management retaining flexibility to adjust this spend based on evolving market conditions without impacting near-term growth.

The Texas market is showing signs of recovery, with the company expressing optimism. Houston, focusing on entry-level homebuyers, and San Antonio are performing strongly. Austin is experiencing a pickup in activity, and Dallas is identified as a market with significant future growth potential as the company scales its operations there.

Within the Mountain region, Las Vegas is highlighted as a particularly strong division. Utah is performing above expectations and is viewed favorably for future growth. In contrast, Colorado, the company's home base, remains a challenging and heavily incentivized market due to its high price points for a non-coastal area. Phoenix is gaining good traction.