American Realty Investors, Inc. :ARL-US: Earnings Analysis: Q4, 2016 By the Numbers : April 4, 2017

American Realty Investors, Inc. reports financial results for the quarter ended December 31, 2016.

Highlights

  • Summary numbers: Revenues of USD 29.56 million, Net Earnings of USD 1.74 million.
  • Gross margins narrowed from 18.46% to 12.91% compared to the same period last year, operating (EBITDA) margins now -23.20% from -25.33%.
  • Change in operating cash flow of -1,013.44% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 29.56 30.07 30.83 29.21 28.96
Revenue Growth (%YOY) 2.05 8.05 27.2 26.12 35.76
Earnings (mil) 1.74 -3.75 2.49 -3.21 -2
Earnings Growth (%YOY) 186.96 27.72 109.34 -201.81 -39.9
Net Margin (%) 5.89 -12.49 8.07 -10.98 -6.91
EPS 0.09 -0.26 0.16 -0.24 -0.15
Return on Equity (%) 3.38 -9.3 5.59 -8.48 -5.12
Return on Assets (%) 0.6 -1.32 0.89 -1.15 -0.73

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, ARL-US‘s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if ARL-US‘s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -1.70% and earnings by 146.38% compared to the previous period.

Earnings Growth Analysis

The company’s gross margins showed no year-on-year improvement. In spite of this, the company’s earnings rose, influenced primarily by the improvement in operating margins (EBITDA margins) from -25.33% to -23.20%. For comparison, gross margins were 18.48% and EBITDA margins were -18.43% in the last period.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

ARL-US‘s year-on-year change in operating cash flow of -1,013.44% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s operating (EBIT) margins contracted from -42.63% to -43.71%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from -5.43% to 9.89%.

EBIT Margin History
PreTax Margin History

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Company Profile

American Realty Investors, Inc. engages in the acquisition, financing, operation and sale of real estate and real estate assets. Its holdings include apartments, office buildings, retail centers and parcels of land. The company was founded in November 1999 and is headquartered in Dallas, TX.

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