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Taylor Morrison (TMHC) Gears Up for Q3 Earnings: What's Up?

Zacks Equity Research

Taylor Morrison Home Corporation TMHC is slated to report third-quarter 2019 results on Oct 30, before the opening bell.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 20.1% and 11.5%, respectively. Encouragingly, it surpassed earnings estimates in each of the trailing 13 quarters.

On a year-over-year basis, the top and bottom lines grew 29% and 46.1%, respectively. Solid homebuilding fundamentals, and strategic initiatives and buyouts aided its second-quarter results. The same factors are likely to have supported third-quarter results as well.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share is pegged at 66 cents, indicating a decline of 20.5% from the year-ago reported earnings of 83 cents per share. Revenues are expected to be $1.15 billion, suggesting a rise of 10.7% from the prior-year quarter.

 

Taylor Morrison Home Corporation Price and EPS Surprise

 

Taylor Morrison Home Corporation Price and EPS Surprise

Taylor Morrison Home Corporation price-eps-surprise | Taylor Morrison Home Corporation Quote

Factors at Play

Taylor Morrison’s primary focus on move-up buyers is expected to have benefited third-quarter earnings, given strong housing market fundamentals. The successful execution of strategic initiatives to boost profitability and building homes on a spec basis are likely to have boosted its performance in quarter to be reported.

In order to meet the needs of millennials and baby boomers who want affordable homes in highly desirable communities, it started building homes for entry-level buyers. Notably, these entry-level buyers constitute the majority of the housing market. This gradual shift to entry-level buyers is likely to have aided its top-line growth in the quarter to be reported.

In fact, management expects average active community count in the range of 345-355, implying significant improvement from the year-ago reported figure of 275 homes. Also, it projects home closings between 2,200 and 2,400 homes, which points to an increase from 2,115 homes reported a year ago.

Although the company’s strategy to build affordable or lower-priced homes is likely to have improved buyers traffic, the same is expected to have weighed on third-quarter revenues.

Overall, solid order volume and synergies from the recent acquisitions are likely to have contributed to third-quarter results. However, low selling prices and higher land/labor costs — which have been a pressing concern for the U.S. homebuilding industry over the last few quarters — are expected to get reflected in the company’s bottom-line number.

For the quarter to be reported, management anticipates home closings gross margin in the mid-to-high 17%, pointing to a decline from the prior-year figure of 18.9%.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Taylor Morrison 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. But that’s not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Taylor Morrison has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: It currently sports a Zacks Rank #1.

Stocks Worth a Look

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.

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +0.97% and holds a Zacks Rank #2.

Vulcan Materials Company VMC has an Earnings ESP of +8.24% and carries a Zacks Rank #2.

MasTec, Inc. MTZ has an Earnings ESP of +0.92% and a Zacks Rank #1.

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Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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Vulcan Materials Company (VMC) : Free Stock Analysis Report
 
Jacobs Engineering Group Inc. (JEC) : Free Stock Analysis Report
 
MasTec, Inc. (MTZ) : Free Stock Analysis Report
 
Taylor Morrison Home Corporation (TMHC) : Free Stock Analysis Report
 
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