PulteGroup Inc. (PHM Quick QuotePHM - Free Report) is set to report second-quarter 2016 results on Jul 21, before the market opens.

Last quarter, it had posted a positive earnings surprise of 26.32%. However, the company missed estimates in two out of the past four quarters, resulting in an average negative surprise of 1.38%.

PULTE GROUP ONC Price and EPS Surprise

PULTE GROUP ONC Price and EPS Surprise | PULTE GROUP ONC Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

The company reported better-than-expected earnings in the first quarter of 2016. Pulte is likely to do well in the second quarter and thereafter, benefiting from steady demand trends, prudent land investments, focus on higher-return business and gains from the Wieland acquisition.  

However, broader housing market headwinds – increasingly competitive environment and cost inflation– and the mild slowdown in sales trends in Texas may hurt the top line in the soon-to-be reported quarter.

Earnings Whisper?

Our proven model does not conclusively show that PulteGroup is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. However, that is not the case here as you will see below.

Zacks ESP: Pulte’s Earnings ESP is 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 33 cents.

Zacks Rank: Though the company’s Zacks Rank #3 increases the predictive power of ESP, PulteGroup’s ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies in the broader construction sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Louisiana-Pacific Corp. (LPX Quick QuoteLPX - Free Report) , with an Earnings ESP of +4.00% and a Zacks Rank #1.

Owens Corning (OC Quick QuoteOC - Free Report) with an Earnings ESP of +9.41% and a Zacks Rank #1.

Potlatch Corporation (PCH Quick QuotePCH - Free Report) , with an Earnings ESP of +42.86% and a Zacks Rank #2.

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