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M/I Homes (MHO) to Report Q2 Earnings: What's in the Cards?

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M/I Homes, Inc.’s (MHO - Free Report) 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 topped the Zacks Consensus Estimate by 53.5% and 12.9%, respectively. Also, the metrics improved approximately 79% and 20%, respectively, on a year-over-year basis. The uptrend was mainly driven by a 26% increase in home closings.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has been unchanged at 86 cents per share over the past 60 days. The said figure indicates a 20.4% decrease from the year-ago earnings of $1.08 per share. The consensus mark for revenues is $589.2 million, suggesting a 5.5% year-over-year decline.

M/I Homes, Inc. Price and EPS Surprise

Factors to Note

M/I Homes’ second-quarter Homebuilding revenues (which accounted for 97.7% of total revenues in the last reported quarter) are expected to have decreased from the year-ago level, given disruptions caused by the coronavirus outbreak in the United States. Also, shortage of building lots and uncertainty surrounding general economic slowdown might have impacted sales in the quarter to be reported.

Also, higher land and labor costs are likely to put pressure on the company’s second-quarter results. The Zacks Consensus Estimate for housing revenues is currently pegged at $574 million, implying a 4% year-over-year decline.

The consensus mark for net new homes delivered is 1,535 homes, which indicates a marginal year-over-year decline. The same for new contracts is pegged at 1,125 units, suggesting fall of 35% year over year. The consensus estimate for backlog is pegged at 2,856 homes, implying a 0.4% decrease from the year-ago period. The same for the value of backlog is $1,117 million, pointing to a decline of 0.7% year over year.

In order to meet affordability concerns, the company reduced the average sales price for the smart series line of homes. Although this strategy is likely to have improved buyers traffic, the same is expected to have weighed on its performance.

The Zacks Consensus Estimate for average sales price is currently pegged at $374, implying a 3.9% decrease from the year-ago period.

That said, low mortgage rates are likely to have somewhat benefited the company, similar to other homebuilding companies. The Zacks Consensus Estimate for financial services revenues is $15.5 million, indicating growth of 8.4% year over year.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for M/I Homes 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 earnings beat. This is not the case here as you will see below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: M/I Homes 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.

Stocks Worth a Look

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 in their respective quarters to be reported.

TopBuild Corp. (BLD - Free Report) has an Earnings ESP of +13.62% and holds a Zacks Rank #1.

D.R. Horton, Inc. (DHI - Free Report) has an Earnings ESP of +6.50% and carries a Zacks Rank #1.

Masco Corporation (MAS - Free Report) has an Earnings ESP of +3.78% and carries a Zacks Rank #1.

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