TRI Pointe (TPH) to Report Q3 Earnings: What's in Store?

TRI Pointe Group, Inc. TPH is slated to report third-quarter 2020 results on Oct 22, before the opening bell.

In the last reported quarter, the company’s earnings and revenues handily surpassed the Zacks Consensus Estimate by 75.9% and 11.9%, respectively. On a year-over-year basis, adjusted earnings and revenues also grew 183.3% and 10%, respectively, buoyed by a recovery in demand.

It surpassed earnings estimates in each of the trailing four quarters, with the average surprise being 42%.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been unchanged at 40 cents per share over the past 30 days. The said figure indicates a 9.1% decrease from the year-ago earnings of 44 cents per share. Also, the consensus mark for revenues is $719.9 million, suggesting a 3.7% year-over-year decline.

TRI Pointe Group, Inc. Price and EPS Surprise

TRI Pointe Group, Inc. Price and EPS Surprise

TRI Pointe Group, Inc. price-eps-surprise | TRI Pointe Group, Inc. Quote

Factors at Play

The company is expected to have witnessed higher demand, buoyed by solid U.S. housing market fundamentals. Resilient housing market conditions are evident from improved monthly U.S. home sales data. Markedly, pending home sales maintained its growth trend in August, marking the fourth uninterrupted month of positive contract activity, according to the National Association of Realtors. Also, existing home sales hit the highest level in August since December 2006. It also marked the third consecutive month of sales gain. Furthermore, new single-family homes were recorded in levels not seen since before the Great Recession. There were 1.01 million newly-built homes sold in August, according to the Census Bureau’s monthly report. Notably, the metric has been rising for four consecutive months.

Also, the company’s virtual sales capabilities and investments to enhance online presence bode well.

During the second-quarter earnings call, it revealed that order activity steadily improved as the second quarter progressed. This momentum continued in July, with net new home orders up more than 40% for the first three weeks of the month from the prior-year period. The order activity has been broad-based, both from a geographic and product segment standpoint, and it has been actively raising prices in most markets served in response to strong demand.

However, reduced in-person interaction and other COVID-19-related restrictions may have been concerns.

For third-quarter 2020, the company expects deliveries between 1,100 and 1,200 homes at an average sales price or ASP between $620,000 and $630,000. In the year-ago period, new home deliveries were 1,187 units at $629,000 ASP.

For the quarter to be reported, the consensus mark for the number of homes delivered is 1,151, which points to a 3% year-over-year decline and 6.3% sequential decrease. The consensus mark for ASP is $625,000, which points to a 0.6% year-over-year drop but 0.2% sequential growth.

It expects homebuilding gross margin percentage in the range of 20-21% for third-quarter 2020 (the year-ago figure was 22.6%) and SG&A expense, as a percentage of homes sales revenues, in the range of 10.2-10.7% (the metric was 11.6% in third-quarter 2019).

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for TRI Pointe in the quarter to be reported. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the changes of an earnings beat. But that’s not the case here.

Earnings ESP: The company 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: Currently, TRI Pointe carries a Zacks Rank #1.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

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

TopBuild Corp. BLD has an Earnings ESP of +1.43% and holds a Zacks Rank #1.

Century Communities, Inc. CCS has an Earnings ESP of +7.53% and carries a Zacks Rank #1.

Eagle Materials Inc. EXP has an Earnings ESP of +3.45% and carries a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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