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Can NVR, Inc (NVR) Spring a Surprise this Earnings Season?


NVR, Inc. NVR, one of the country's largest homebuilding and mortgage-banking companies, is expected to report first-quarter 2017 results on Apr 20.

Last quarter, the company posted a positive earnings surprise of 13.21%. Also, the company surpassed estimates in two of the last four quarters, resulting in an average positive surprise of 0.90%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

NVR is well poised to gain traction in 2017 on the current positive housing scenario. In spite of the recent uptick in mortgage rates, affordability is still at high levels. The company is comfortably positioned given the recent rally in the housing industry buoyed by the several latest released statistics.

Steady job and wage growth, a recovering economy, moderating home price gains, historically low interest/mortgage rates, rising rentals, rapidly increasing household formation and a limited supply of inventory point at continually strong demand in 2017. NVR’s disciplined business model, focused on maximizing liquidity and minimizing risk, is likely to generate more returns to its shareholders.

Again, NVR’s shares have gained 28.7% so far this year compared with 20.1% growth for the Zacks categorized Building-Residential/Commercial industry. Estimates also moved north for the current year and 2018 in the last 90 days.

However, going forward, labor shortage along with rising land and labor costs can keep the housing momentum at check and mar the company's performance.

For the first quarter, the Zacks Consensus Estimate for earnings stands at $128.05, reflecting a 23.6% year-over-year increase. Meanwhile, the estimate for revenues is pegged at $6.60 billion, implying 15.6% growth.

Earnings Whispers

Our proven model does not conclusively show that NVR is likely to beat on earnings this quarter. This 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. However, that is not the case here as you will see below

Zacks ESP: NVR’s Earnings ESP is 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $19.74. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NVR’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

NVR, Inc. Price and EPS Surprise

NVR, Inc. Price and EPS Surprise | NVR, Inc. Quote

Stocks to Consider

Here are a few companies in the construction sector that, according to our model, have the right combination of elements to post an earnings beat this quarter:

TopBuild Corp. BLD has an Earnings ESP of +2.86% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

TopBuild is slated to release quarterly results on May 10.

Louisiana-Pacific Corporation LPX has an Earnings ESP of +27.59% and a Zacks Rank #1. It is expected to release quarterly results on May 8.

Meritage Corporation MTH has an Earnings ESP of +2.38% and a Zacks Rank #2. Meritage is slated to release quarterly results on Apr 27.

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