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Higher Deliveries to Aid NVR's Q4 Earnings Amid Higher Cost

Zacks Equity Research

NVR, Inc.’s NVR fourth-quarter 2019 results are expected to show a year-over-year increase in earnings and revenues, courtesy of higher deliveries, solid homebuilding business and strong housing market fundamentals. However, rising land and labor costs and lower selling prices are somewhat expected to dent profitability in the fourth quarter.

In the last reported quarter, the company’s revenues and earnings increased 3% and 16.2% year over year, respectively. Moreover, its earnings surpassed the Zacks Consensus Estimate by 8.4%. The company has a strong earnings surprise history, having surpassed analysts’ expectations in 11 of the trailing 12 quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $58.65 per share, which suggests a 0.1% increase from the year-ago quarter’s reported figure. The consensus mark for revenues is pegged at $2.03 billion, which reflects a rise of 3.6% from the year-ago quarter’s tally.

Factors to Consider

NVR’s focus on solid business model and strong housing market fundamentals are expected to have benefited the company’s performance in the to-be-reported quarter. Also, favorable mortgage rates and higher deliveries are expected to have aided NVR’s performance.

Meanwhile, NVR’s solid business model is likely to have contributed to its performance. Unlike other homebuilders, NVR’s sole business is selling and building quality homes by acquiring finished building lots, without the risk of owning and developing land in a cyclical industry. This strategy has enabled it to gain efficiencies and a competitive edge over the last few quarters.

However, land and labor costs have been a pressing concern for NVR. This is likely to have exerted pressure on the company’s fourth-quarter results as well. Labor shortages lead to higher wages, while land prices inflated due to limited availability in the quarter.

The company has been strategically shifting to smaller and lower-priced products to attract more customers. Hence, lower average selling price is expected to have hurt its fourth-quarter revenues to some extent.

Here is What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for NVR this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earning beat. This is not the case here.

Earnings ESP: NVR has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVR, Inc. Price and EPS Surprise

 

NVR, Inc. Price and EPS Surprise
NVR, Inc. Price and EPS Surprise

NVR, Inc. price-eps-surprise | NVR, Inc. Quote

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Stocks to Consider

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat.

North American Construction Group Ltd. NOA has an Earnings ESP of +14.29% and sports a Zacks Rank #1.

Potlatch Corporation PCH has an Earnings ESP of +15.00% and holds a Zacks Rank #2.

Thor Industries, Inc. THO has an Earnings ESP of +10.81% and a Zacks Rank #3.

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Potlatch Corporation (PCH) : Free Stock Analysis Report
 
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Zacks Investment Research