Will Lower Revenues and Margin Impact NVR's Q2 Earnings?

NVR, Inc.’s NVR second-quarter 2020 results are expected to reflect earnings and revenue decline on a year-over-year basis.

In the last reported quarter, the company’s earnings and revenues decreased 6% each year over year. However, its earnings surpassed the Zacks Consensus Estimate by 7%. The company has a strong earnings surprise history, having surpassed analysts’ expectations in 12 of the trailing 13 quarters.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has increased 6.8% to $44.89 over the past 60 days. However, the estimated figure indicates a decline of 15.5% from the year-ago quarter. The consensus mark for revenues is pegged at $1.65 billion, suggesting a 6.4% decrease from the year-ago reported figure of $1.76 billion.

NVR, Inc. Price and EPS Surprise

NVR, Inc. Price and EPS Surprise

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

Key Factors to Note

NVR’s second-quarter Homebuilding revenues (accounting for 97.7% of total revenues) are expected to have decreased from the year-ago level, given disruptions caused by the coronavirus outbreak in the United States.

That said, low mortgage rates are likely to have somewhat benefited NVR, similar to other homebuilding companies Lennar LEN and KB Home KBH. Also, more demand for affordable housing from multiple demographic groups is likely to have given a boost to its order growth. The company has been strategically shifting to smaller and lower-priced products to attract more customers.

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

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

Stocks to Consider

Here is a homebuilding company in the Zacks Construction sector, which according to our model has the right combination of elements to post an earnings beat in the upcoming releases.

D.R. Horton, Inc. DHI has an Earnings ESP of +6.5% and sports a Zacks Rank #1.

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KB Home (KBH): Free Stock Analysis Report
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D.R. Horton, Inc. (DHI): Free Stock Analysis Report
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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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