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Solid Housing & Build-to-Order Model to Aid MDC Q1 Earnings

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M.D.C. Holdings, Inc. (MDC - Free Report) is scheduled to report first-quarter 2021 results on Apr 29, before the opening bell.

In the last reported quarter, the company’s top and bottom lines beat the Zacks Consensus Estimate by 0.3% and 28.1% as well as improved 10.9% and 55% year over year, respectively. Notably, earnings surpassed the consensus mark in four of the trailing five quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for MDC’s first-quarter earnings is pegged at $1.37 per share, implying growth of 163.5% on a year-over-year basis. The consensus estimate for revenues is $1.13 billion, indicating a 57.8% year-over-year increase.

M.D.C. Holdings, Inc. Price and EPS Surprise

\M.D.C. Holdings, Inc. Price and EPS Surprise

M.D.C. Holdings, Inc. price-eps-surprise | M.D.C. Holdings, Inc. Quote

Factors to Note

MDC is likely to have registered impressive growth in first-quarter 2021, given solid housing market fundamentals in the United States. The company’s first-quarter Home sales (which accounted for 96.5% of total 2020 revenues) are expected to have benefited from solid demand backed by historically low mortgage rates and a highly motivated buyer.

Also, buyers have been seeking homes in lower-density areas, thereby giving a boost to new home construction in such regions. Focus on entry-level buyers and the customer-centric Build-to-Order process should have benefited the company in the first quarter.

The Zacks Consensus Estimate for Home sales revenues of $1.10 billion suggests a 57.7% increase from a year ago.

In addition to the above-mentioned tailwinds, its focus on the mortgage business — which continues to witness increased volume — are expected to have aided revenues. The consensus mark for Financial Services revenues of $35.37 million suggests a 61.6% increase from a year ago.

The company expects homes deliveries between 2,200 and 2,400 homes for the first quarter, depicting an increase from 1,547 units a year ago. It expects average selling price of homes delivered for the quarter within $470,000-$480,000, indicating an increase from $450,600 a year ago.

The Zacks Consensus Estimate for units delivered is pegged at 2,329 units, implying an improvement of 50.5% from the year-ago period. The same for average selling price is pegged at $474,000 per home, suggesting 5.2% year-over-year growth.

The consensus estimate for net unit orders is currently pegged at 2,759. This suggests a 15% increase from a year ago. The consensus estimate for backlog is 7,085 units, implying a 52.3% improvement from first-quarter 2020.

The consensus estimate for active subdivision count is currently pegged at 196, suggesting a 5.9% increase from a year ago.

However, it is likely to have witnessed lower backlog conversion due to strong year-over-year increase in orders in first-quarter 2020 and construction delays in certain markets served owing to the pandemic. Also, higher land, labor and material costs (especially lumber) are expected to reflect on its first-quarter margins.

What the Zacks Model Unveils

Our proven model does not conclusively predicts an earnings beat for MDC 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. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Currently, it has a Zacks Rank #2 and an Earnings ESP of 0.00%. You can see the complete list of today’s Zacks #1 Rank stocks here.

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.

Meritage Homes Corporation (MTH - Free Report) has an Earnings ESP of +0.67% and holds a Zacks Rank #3.

PotlatchDeltic Corporation (PCH - Free Report) has an Earnings ESP of +1.56% and sports a Zacks Rank #1.

U.S. Concrete, Inc. (USCR - Free Report) has an Earnings ESP of +51.22% and a Zacks Rank #1.

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