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MDC Sees Rise in Q3 Order Trend on Solid Housing Fundamentals

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M.D.C. Holdings, Inc. (MDC - Free Report) or MDC announced an increase in net new home order activity for the first two months of third-quarter 2020. Net new home orders for the said period increased a whopping 75% year over year to 2,477 from 1,418 reported a year ago. The upside was backed by a 73% improvement in the monthly sales absorption rate of 6.48 and 1% rise in the average number of active subdivisions of 191.

Regionally, west contributed 72%, Mountain added 86% and East accounted for 64% of total net new orders growth. Notably, the company believes that it is well positioned to reach 8,000 home deliveries in 2020. Also, it anticipates significant growth in home deliveries in 2021 as well, backed by lot supply and the right product type.

MDC, one of the country’s largest homebuilders, has been benefiting from solid housing market fundamentals. Notably, record low mortgage rates, improving job market and short supply of existing homes for sale are benefiting the company as well as other industry players like D.R. Horton, Inc. (DHI - Free Report) , Meritage Homes Corporation (MTH - Free Report) and Toll Brothers, Inc. (TOL - Free Report) . Also, buyers are seeking homes in lower-density areas, thereby giving a boost to new home construction in such regions.

MDC — a Zacks Rank #1 (Strong Buy) stock — has gained 124.1% in the past six months compared with the Zacks Building Products - Home Builders industry, Zacks Construction sector and S&P 500 Index’s 111.3%, 70.8% and 41.5% growth, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sales of new single-family homes in the United States have seen a strong uptick in the past few months post the April dip, triggering hopes that the COVID-19 outbreak-induced housing slowdown might be coming to an end. MDC primarily benefits from its focus on building single-family detached homes for first-time and move-up buyers.

For the first six months of 2020, the company generated home sales revenues of $1.58 billion, up 14.8% year over year. The upside was backed by a 20% rise in new home deliveries. Also, net new orders grew 13% from the comparable year-ago period. MDC expects deliveries between 1,900 and 2,100 homes for the third quarter. Also, it projects deliveries within 7,700-8,000 homes for 2020.

Earnings estimates for 2020 have gained 56.9% over the past 60 days. Notably, earnings for the current year are expected to grow 26.1% year over year. Also, its earnings are expected to rise 7.9% in the next three-five years. The company’s earnings surpassed analysts’ expectations in nine of the trailing 14 quarters.

A solid VGM Score of B is another reason for investors to believe in its fundamentals.

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