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NVR (NVR) Up 7.5% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for NVR (NVR). Shares have added about 7.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is NVR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

NVR Q3 Earnings Miss Estimates, Strong Margins

NVR, Inc. reported mixed results for third-quarter 2022. This homebuilding and mortgage banking company’s earnings missed the Zacks Consensus Estimate and revenues beat the same.

Inside the Numbers

The company reported earnings of $118.51 per share, which lagged the consensus mark of $126.5 by 6.3%. The reported figure increased 37% from the prior-year quarter’s figure of $86.44 per share.

Total revenues (Homebuilding & Mortgage Banking fees combined) amounted to $2.78 billion for the reported quarter, reflecting growth of 15.9% on a year-over-year basis.

Segment Details

Homebuilding: Revenues in the segment totaled $2.74 billion, up 17.2% from the year-ago quarter’s levels. The metric also topped the consensus estimate of $2.49 billion by 10.2%. Settlements in the quarter were up 5% year over year to 5,949 units. The average selling price or ASP was $453,400, up 3% year over year.

Gross margin improved 140 basis points to 23.6%, buoyed by higher ASP.

New orders were down 15% from the prior-year quarter’s levels to 4,421 units. The average sales price of new orders rose 3% from the prior-year quarter’s figure to $453,400. The cancellation rate was 15% for the quarter, up from 9.2% a year ago. Average active communities totaled 423, up from 414 reported in third-quarter 2021.

Quarter-end backlog on a unit basis declined 11% from the prior-year quarter’s figure of 10,758 and fell 5% on a dollar basis to $5.09 billion.

Mortgage Banking: Mortgage banking fees plunged 36.5% year over year to $37.5 million. Mortgage closed loan production totaled $1.66 billion, up 2% year over year. The capture rate was 81% for the third quarter, down from 88% a year ago.

Financials

At the third-quarter end, NVR had cash and cash equivalents for Homebuilding and Mortgage Banking of $1.75 billion and $18.4 million compared with $2.55 billion and $28.4 million, respectively, at 2021-end.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -15.84% due to these changes.

VGM Scores

At this time, NVR has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise NVR has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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