Transcontinental Realty Investors, Inc. :TCI-US: Earnings Analysis: Q3, 2016 By the Numbers : November 29, 2016

Transcontinental Realty Investors, Inc. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Transcontinental Realty Investors, Inc. – American Realty Investors, Inc., Independence Realty Trust, Inc., Armada Hoffler Properties, Inc., Howard Hughes Corporation, Consolidated-Tomoka Land Co., Education Realty Trust, Inc. and Income Opportunity Realty Investors, Inc. (ARL-US, IRT-US, AHH-US, HHC-US, CTO-US, EDR-US and IOT-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 29.78 million, Net Earnings of USD -4.55 million.
  • Gross margins widened from 14.79% to 19.77% compared to the same period last year, operating (EBITDA) margins now -10.77% from -14.78%.
  • Year-on-year change in operating cash flow of -8.93% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as 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):

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 29.78 30.52 28.9 28.62 27.54
Revenue Growth (%YOY) 8.12 28.48 29.59 39.71 47.65
Earnings (mil) -4.55 4.66 -3.54 -1.98 -6.63
Earnings Growth (%YOY) 31.45 2811.88 -4067.06 -123.37 -74.21
Net Margin (%) -15.27 15.26 -12.25 -6.9 -24.08
EPS -0.55 0.51 -0.43 -0.26 -0.79
Return on Equity (%) -8.54 7.94 -6.75 -3.9 -11.94
Return on Assets (%) -1.59 1.67 -1.28 -0.72 -2.47

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Market Share Versus Profits

Revenues History
Earnings History

TCI-US‘s change in revenue this period compared to the same period last year of 8.12% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that TCI-US is holding onto its market share. Also, for comparison purposes, revenues changed by -2.44% and earnings by -197.57% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 14.79% to 19.77% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -14.78% to -10.77% compared to the same period last year. For comparison, gross margins were 24.16% and EBITDA margins were -1.57% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

TCI-US‘s change in operating cash flow of -8.93% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -38.58% to -30.97% and (2) one-time items. The company’s pretax margins are now -14.80% compared to -23.80% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Transcontinental Realty Investors, Inc.

Company Profile

Transcontinental Realty Investors, Inc. is a real estate investment company, which engages in the acquisition, development, and ownership of income-producing residential and commercial real estate properties. It operates through the following segments: Apartments, Commercial Buildings, Land, and Other. The firm also operates through the sub categories of segments: Same Property Portfolio, Acquired Properties, and Developed Properties in the Lease-up Phase. The Same Property Portfolio consists of properties that were held for the entire period for both years being compared. The Acquired Properties consists of properties that are acquired but not held for the entire period for both periods being compared. The Developed Properties in the Lease-Up Phase consists of completed projects that are being leased-up. The company was founded on September 6, 2011 and is headquartered in Dallas, TX.

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