Champion Homes (SKY) shares moved higher on Tuesday after the company delivered a fiscal fourth-quarter earnings beat and announced a deal to expand its retail footprint in the western U.S. The stock was up about 0.9% to $71.58 in afternoon trading.
The numbers were solid: adjusted EPS of $0.68 topped the analyst estimate of $0.60, and revenue of $621.3 million came in above the $607.3 million consensus. Net sales rose 4.6% year over year. But not everything was rosy — net income attributable to Champion fell 18.4% to $29.7 million, dragged down by acquisition-contingent consideration adjustments and product liability true-ups. Adjusted net income, which strips out those one-time items, edged up 0.8% to $37.7 million.
Adjusted EBITDA climbed 6.3% to $55.9 million, and the adjusted EBITDA margin improved slightly to 9.0% from 8.9%. Gross margins held steady at 25.7%, helped by higher selling prices and a favorable product mix, though softer demand in the community/REIT channel provided some headwinds.
Demand and Orders: A Mixed Bag
U.S. home sales volume dipped 0.6% to 5,908 homes, but the average selling price per home rose 4.6% to $98,600. In Canada, factory-built home sales increased to 243 from 230. Backlog fell 8% from a year ago but improved 18.8% sequentially to $316 million — a sign that order momentum is picking up.
On the earnings call, management said fourth-quarter manufacturing orders increased 7% year over year. They also noted that dealer inventory normalization is improving, with independent retailers returning to more typical ordering patterns. Champion outperformed the broader HUD market, which declined about 9% during the quarter.
The Homes Direct Deal
Champion agreed to acquire the assets of Homes Direct, which operates 11 retail locations across Arizona, California, Colorado, New Mexico, and Oregon. Terms weren't disclosed, but 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, which should improve utilization at the company's western manufacturing facilities. It's a smart way to expand retail presence and capture more of the value chain.
Inflation and Outlook
Management warned that inflationary pressures accelerated through the fourth quarter and into the first quarter of fiscal 2027, particularly across lumber, OSB, steel, and petroleum-linked products. Affordability pressures are pushing consumers toward lower-priced homes and fewer upgrades, and margin recovery efforts are struggling to keep up with rising input costs.
For the fiscal first quarter of 2027, Champion expects revenue to be roughly flat year over year and forecasts adjusted gross margin of 24.5% to 25.5% — a bit below the 25.7% reported in Q4.
Cash Flow and Capital Allocation
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 fell to $14.4 million from $24.8 million. The company also repurchased $200 million of stock during the fiscal year and refreshed its share repurchase authorization with an additional $150 million in May 2026.
Management expressed optimism about the "21st Century Road to Housing Act" and state-level zoning reforms, which they said could expand long-term demand for off-site housing. As CEO Larson put it, "That relative value proposition only becomes more powerful in a higher cost, higher uncertainty environment."
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