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TRI Pointe (TPH) to Post Q2 Earnings: What's in the Offing?

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TRI Pointe Group, Inc. (TPH - Free Report) is slated to report second-quarter 2021 results on Jul 22, before market open.

In the last reported quarter, its earnings topped the Zacks Consensus Estimate by 28.3% and increased 146% year over year driven by continuation of favorable housing dynamics and geographic expansion along with an increase in home prices. The company's earnings topped analysts’ expectations in each of the trailing eight quarters.

Its home sales revenues also grew 20% from the prior year, backed by an 18% rise in deliveries and 2% increase in average sales price or ASP.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings has increased 3.8% to 81 cents per share over the past seven days. This indicates a solid increase of 58.8% from 51 cents recorded a year ago. The consensus estimate for home sales revenues is pegged at $998.7 million, suggesting a rise of 30.1% from the prior-year quarter.

Tri Pointe Homes Inc. Price and EPS Surprise

Tri Pointe Homes Inc. Price and EPS Surprise

Tri Pointe Homes Inc. price-eps-surprise | Tri Pointe Homes Inc. Quote

Factors to Note

TRI Pointe is likely to have generated higher revenues and earnings in second-quarter 2021, given solid demand for homes. The demand trend is buoyed by solid U.S. housing market fundamentals. The combination of favorable demographic forces, low inventory levels, historically low mortgage rates and years of under-building has taken the nation's need for new housing supply to new heights. The imbalance in demand and supply of homes, and rising material costs prompted builders to increase prices.

During the first-quarter earnings call, it revealed that demand was robust in the quarter. This momentum continued in April, with 340 net new home orders through Apr 18. Order activity has been broad-based, both from a geographic and product segment standpoint. It has been actively raising prices in most markets served in response to strong demand. Additionally, the company’s virtual sales capabilities and investments to enhance online presence bode well.

Per the guidance provided during the first-quarter earnings call, TRI Pointe expects to deliver 1,500-1,600 homes at an ASP of $630-640K for the second quarter. The estimated deliveries indicate an increase of 26.1% from the year-ago period, considering the midpoint of the range. ASP was $624,000 a year ago. The company expects Homebuilding gross margin within 22-23%, suggesting an improvement of 40-140 basis points year over year for the second quarter. SG&A expenses — as a percentage of home sales revenues — are expected within 10-10.5%. The metric in the year-ago quarter was 10.8%.

A Look at Zacks Estimates

Within Homebuilding, the Zacks Consensus Estimate for home sales is pegged at $1,003 million, which indicates an increase of 30.6% from $768 million in the year-ago period. The same for land and lot sales is $1.5 million, indicating a significant increase from $0.22 million reported in the prior-year period. The consensus mark for homes delivered and ASP is 1,584 units and $635K, respectively. This indicates a year-over-year rise of 28.9% and 3.3%, respectively.

The consensus mark for Financial Services revenues is $2.62 million, indicating 13.9% growth from a year ago.

The consensus estimate for new orders is currently pegged at 1,610 units, suggesting a 20.9% year-over-year jump. The same for backlog is pegged at 3,851 units, implying growth of 50.5% from the prior year.

What Our Model Indicates

Our proven model predicts an earnings beat for TRI Pointe 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.

Earnings ESP: The Earnings ESP for the company is +1.65%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: TRI Pointe currently has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

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.

ChampionX Corporation (CHX - Free Report) has an Earnings ESP of +10% and holds a Zacks Rank #2.

United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +6.18% and a Zacks Rank #2.

Watsco, Inc. (WSO - Free Report) has an Earnings ESP of +3.46% and a Zacks Rank #2.