HomeMost PopularInvestingNVR Third Quarter Earnings Preview: An Analysis of What to Expect

NVR Third Quarter Earnings Preview: An Analysis of What to Expect

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The upcoming release of NVR, Inc.’s third-quarter 2023 earnings and homebuilding revenues is anticipated to reflect a decline compared to the previous year. This decrease can be attributed to various factors, including high mortgage rates, a decrease in the average sales price of new orders, and ongoing macroeconomic risks.

In the previous quarter, NVR’s earnings exceeded the Zacks Consensus Estimate by 15.4%, while homebuilding revenues fell short by 3.9%. On a year-over-year basis, earnings and homebuilding revenues dropped by 6% and 12.5%, respectively.

Trend in Estimate Revision

Over the past seven days, the Zacks Consensus Estimate for NVR’s earnings per share (EPS) in the third quarter has declined slightly to $112.79 from $113.01. This estimate suggests a 4.8% decline compared to the same quarter last year.

Key Factors to Consider

NVR’s homebuilding revenues, which account for 97.4% of total revenues, are expected to have declined on a year-over-year basis in the third quarter due to a decrease in settlements and rising mortgage rates. Additionally, a decline in backlog has impacted its growth prospects.

However, despite tough year-over-year comparisons, NVR is expected to generate sequentially higher revenues due to the lack of existing homes inventory. Furthermore, its acquisition strategy and reduced cancellation rates may help offset the negative impacts of the aforementioned headwinds.

For the quarter under review, the average selling price of settlements is expected to decline by 1.6% year over year to $452,900. Additionally, total settlements are anticipated to decrease by 6.6% to 5,559 units compared to the previous year.

The housing demand has been adversely affected by ongoing macroeconomic uncertainties, inflationary pressures, and high interest rates.

Moreover, NVR’s bottom line is expected to be impacted by material cost inflation and rising wages. Homebuilding selling, general, and administrative expenses are projected to increase by 24.4% year over year. Income before tax (homebuilding segment) is also expected to decline by 10.5% to $466 million.

Given the aforementioned economic uncertainties, it is important to note that our model does not conclusively predict an earnings beat for NVR this time around. The company lacks a positive Earnings ESP and a Zacks Rank of 1 (Strong Buy), 2 (Buy), or 3 (Hold) to increase the odds of an earnings beat.

Stocks Poised to Beat on Earnings

While NVR may face challenges, there are companies in the Construction sector that have stronger prospects for an earnings beat in the upcoming quarter:

  • KBR, Inc. (KBR): KBR is expected to see a 12.3% increase in earnings for the quarter, with better-than-expected earnings reported in the past four quarters.
  • Louisiana-Pacific Corporation (LPX): LPX is anticipated to have a 19.2% decline in earnings for the quarter, but it has a track record of reporting better-than-expected earnings in three of the last four quarters.
  • Vulcan Materials Company (VMC): VMC is projected to deliver a 23.6% increase in earnings for the quarter. The company has reported better-than-expected earnings in three of the last four quarters.

To stay up to date with upcoming earnings announcements, you can refer to the Zacks Earnings Calendar.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of Nasdaq, Inc.

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