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MDC Gears Up to Report Q2 Earnings: What's in the Offing?

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M.D.C. Holdings, Inc. (MDC - Free Report) is scheduled to report second-quarter 2021 results on Jul 29, before market open.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 10.2% but revenues missed the same by 4.2%. However, both metrics increased 201% and 51.2% on a year-over-year basis, respectively. Markedly, the company’s earnings beat expectations in five of the last six quarters. The outperformance was driven by robust housing revenues and solid housing gross margin.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has moved 17.2% up to $1.98 over the past 90 days. The estimated figure indicates an increase of 63.6% from $1.21 per share reported in the year-ago quarter. The consensus mark for revenues is pegged at $1.35 billion, suggesting 46.6% growth from the year-ago reported figure of $919.7 million

Factors to Consider

MDC’s earnings and revenues for second-quarter 2021 are expected to have improved on a year-over-year basis, backed by robust housing demand, consistent supply of affordable homes and the company’s build-to-order model. The improvement in home sales can be primarily attributed to the low mortgage rates and the company’s customer centric approach. The Zacks Consensus Estimate for Home Sales revenues for second-quarter is pegged at $1.30 billion, suggesting a 46.6% increase from a year ago. The company’s second-quarter homebuilding revenues are expected to increase on the aforesaid factors.

Also, a robust backlog level is likely to have supported the spike in deliveries. Moreover, given the size of the backlog and increased numbers of lots controlled, the company is in a solid position to deliver excellent results for second-quarter 2021.

The company expects homes deliveries between 2,500 and 2,700 homes for the second quarter, depicting an increase from 1,900 units a year ago. It expects average selling price or ASP of homes delivered for the quarter of nearly $500,000, indicating an increase from $466,700 a year ago. Gross margin from home sales for second-quarter 2021 is expected at 22.5%, indicating an increase from 20.2% in the year-ago quarter.

The Zacks Consensus Estimate for units delivered is pegged at 2,613 units, implying an improvement of 37.5% from the year-ago period. The same for average selling price is pegged at $500,000 per home, suggesting 7.1% year-over-year growth.

The consensus estimate for net unit orders is currently pegged at 2,510. This suggests a 5% increase from a year ago. The consensus estimate for backlog is 7,582 units, implying a 47.4% improvement from second-quarter 2020.

Furthermore, MDC’s consistent focus on the mortgage business is expected to have aided revenues during the quarter to be reported. Of late, the company’s Financial Services revenues are improving significantly. The consensus mark for Financial Services revenues of $46.2 million suggests a 72.9% increase from a year ago.

However, rising labor costs owing to the shortage of labor supply might have marred the company’s margins in the to-be-reported quarter. Also, the company is witnessing a rise in material costs that are likely to exert pressure on the company’s second-quarter margins as well.

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

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for MDC this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP for MDC is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently has a Zacks Rank #3. 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 earnings beat in their respective quarters to be reported.

Owens Corning (OC - Free Report) has an Earnings ESP of + 14.56% and a Zacks Rank #2.

Quanta Services, Inc. (PWR - Free Report) has an Earnings ESP of +10.32% and a Zacks Rank #2.

United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +4.89% and a Zacks Rank #2.