Champion Homes, Inc. (NYSE:SKY) shares traded higher on Tuesday after the company reported fourth-quarter fiscal 2026 adjusted EPS of 68 cents, beating the analyst estimate of 60 cents.
Revenue of $621.3 million exceeded the $607.3 million consensus estimate, while net sales increased 4.6% year over year.
• Champion Homes stock is trading at depressed levels. What’s next for SKY stock?
Earnings and Margins
Net income attributable to Champion Homes declined 18.4% to $29.7 million, driven by acquisition-contingent consideration adjustments and product liability true-ups.
Adjusted net income increased 0.8% to $37.7 million. Adjusted EBITDA rose 6.3% to $55.9 million, while adjusted EBITDA margin improved to 9.0% from 8.9%.
The adjusted gross margin remained flat at 25.7%, supported by higher selling prices and a favorable product mix, partially offset by softer demand in the community/REIT channel.
Demand Trends and Orders
U.S. home sales volume declined 0.6% to 5,908 homes, while average selling price per U.S. home increased 4.6% to $98,600. Canadian factory-built home sales rose to 243 from 230 homes.
Backlog declined 8% year over year but increased 18.8% sequentially to $316 million.
During the earnings call, management said fourth-quarter manufacturing orders increased 7% year over year and noted that dealer inventory normalization is improving, with independent retailers returning to more typical ordering patterns.
Champion also said it outperformed the broader HUD market, which declined about 9% during the quarter.
Homes Direct Deal and Outlook
Champion Homes agreed to acquire the assets of Homes Direct, including 11 retail locations across Arizona, California, Colorado, New Mexico and Oregon, expanding its retail footprint in the western U.S.
Terms were not disclosed.
Homes Direct generates about $70 million in annualized revenue and is the largest independent manufactured and modular home dealer in the western U.S.
Executives said the deal creates an opportunity to replace competing brands currently sold at Homes Direct stores with Champion-built homes, improving utilization at the company's western manufacturing facilities.
Management warned inflationary pressures accelerated through the fourth quarter and into the first quarter of fiscal 2027, particularly across lumber, OSB, steel and petroleum-linked products.
The company said affordability pressures are driving consumers toward lower-priced homes and fewer upgrades, while margin recovery efforts continue to lag rising input costs.
Champion expects fiscal first-quarter 2027 revenue to be approximately flat year over year and forecasts adjusted gross margin of 24.5% to 25.5%.
Cash Flow and Commentary
Champion generated $303.9 million in operating cash flow during fiscal 2026 and ended the year with $638.3 million in cash and equivalents. Long-term debt declined to $14.4 million from $24.8 million.
The company repurchased $200 million of stock during fiscal 2026 and refreshed its share repurchase authorization with an additional $150 million in May 2026.
Management also expressed optimism about the "21st Century Road to Housing Act" and state-level zoning reforms, which executives said could expand long-term demand for off-site housing. Larson added, "That relative value proposition only becomes more powerful in a higher cost, higher uncertainty environment."
SKY Price Action: Champion Homes shares were trading 0.90% higher at $71.58 at the time of publication on Tuesday.
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