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NVR (NVR) Up 1.1% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for NVR (NVR - Free Report) . Shares have added about 1.1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NVR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

NVR Shares Increase on Q3 Earnings Beat and Solid Orders

NVR, Inc. reported better-than-expected third-quarter 2020 results. Earnings beat the Zacks Consensus Estimate and also improved year over year, buoyed by solid housing market fundamentals in the United States, courtesy of low mortgage rates.

Inside the numbers

The company reported earnings of $65.11 per share, which topped the consensus mark of $62.01 by 5%. Also, the reported figure grew 16% from the prior-year figure of $56.11 per share.

Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $1.99 billion for the reported quarter. The figure increased 4% on a year-over-year basis, attributable to higher deliveries.

Segment Details

Homebuilding: Revenues in the segment totaled $1.92 billion, up 3% from the year-ago level. The metric, however, missed the consensus estimate by 4.2%. Settlements were up 1% year over year to 5,180 units.

Nonetheless, new orders increased a notable 40% from the prior year to 6,681 units. Average sales price of new orders also inched up 4% from the prior-year quarter to $384.200. Cancellation rate was 12% for the quarter, down from 16% in the year-ago period.

Quarter-end backlog — on a unit and dollar basis — was up 32% and 37% from the year-ago quarter to 12,124 units and $4.66 billion, respectively.

Gross margin improved 100 basis points to 20%.

Mortgage Banking: Mortgage banking fees increased 82.6% year over year to $69.3 million. Moreover, mortgage closed loan production totaled $1.38 billion, up 1% year over year.

Financials

At third quarter-end, NVR had cash and cash equivalents for Homebuilding and Mortgage Banking of $2.54 billion and $21.5 million compared with $1.11 billion and $29.4 million, respectively, at 2019-end.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, NVR has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, NVR has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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