LGI Homes 2025 Q2 Earnings Profitability Drops 46.2% Amid Revenue Decline

LGI Homes reported mixed results in Q2 2025, with both revenue and net income falling year-over-year. The company did not provide guidance for the quarter but withdrew full-year 2025 guidance due to near-term visibility concerns.

Revenue
LGI Homes reported total revenue of $483.49 million in Q2 2025, a 19.8% decline compared to $602.50 million in the same period of 2024. Retail home sales accounted for the majority of the revenue stream, generating $412.06 million, while wholesale home sales contributed $71.43 million. Together, these segments comprised the company’s total home sales revenue for the quarter.

Earnings/Net Income
Net income for the quarter dropped to $31.53 million, or $1.36 per share, representing a 46.2% and 45.4% decline, respectively, from the prior-year period. The company has remained profitable for 12 consecutive years in the same quarter, but the sharp decline in earnings highlights ongoing market pressures. Despite strong sequential gross margin improvement, the drop in revenue and profitability suggests a challenging operating environment.

Price Action
Following the earnings report, LGI Homes’ stock rose 8.23% on the day and gained 4.11% for the week. The stock also saw a 9.02% increase month-to-date as of the reporting date.

Post Earnings Price Action Review
A buy-and-hold strategy executed after a revenue increase in the earnings report over the past three years would have yielded a -54.80% return, far below the 48.58% benchmark. With a CAGR of -23.98%, maximum drawdown of 0.00%, and a Sharpe ratio of -0.55, the strategy proved highly volatile and unprofitable, indicating significant risk exposure.

CEO Commentary
Eric Lipar, Chairman and CEO, highlighted a sequential 190-basis-point improvement in adjusted gross margin to 25.5% and 1,323 home closings during the quarter. While he acknowledged ongoing challenges from affordability and economic uncertainty, Lipar noted signs of stabilization in late June and July. The company remains focused on cost savings, margin improvement, and capital allocation, with $367,568 in shares repurchased during the quarter.

Guidance
For Q3 2025, LGI expects 1,100 to 1,300 home closings, an average sales price of $360,000 to $365,000, and gross margins between 21.5% and 22.5%. Adjusted gross margin is projected at 24.0% to 25.0%, and SG&A is expected to range between 15.0% and 16.0% of home sales revenue. The effective tax rate is anticipated to remain at approximately 24.5%.

Additional News
On August 6, 2025, LGI Homes issued financial guidance for Q3 2025, projecting 1,100 to 1,300 home closings and approximately 145 active selling communities by quarter’s end. The company emphasized its strategic focus on expanding market presence and increasing sales volume, with projected gross margins between 21.5% and 22.5%. SG&A expenses are expected to remain between 15.0% and 16.0% of home sales revenue. While the projections reflect optimism about improving market conditions, investors are advised to consider LGI’s historical performance amid broader economic uncertainties. The company’s strong liquidity, as indicated by its Altman Z-Score of 3.01 and Beneish M-Score of -2.31, supports its financial resilience. Additionally, valuation metrics such as a P/E ratio of 7.05 and a P/S ratio of 0.59 suggest the stock may be undervalued. Analysts maintain a positive outlook with a target price of $93.50.