M/I Homes Gears Up for Q2 Earnings: What to Expect?

M/I Homes, Inc. MHO is scheduled to report second-quarter 2024 results on Jul 30, 2024, before market open.

In the last reported quarter, the company's earnings and revenues topped the Zacks Consensus Estimate by 20.7% and 4.1%, respectively. On a year-over-year basis, earnings and revenues increased 31% and 5%, respectively.

This homebuilding company's earnings topped the consensus mark in three of the trailing four quarters and missed on the remaining occasion, the average surprise being 19%.

Trend in Estimates

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has remained unchanged at $4.79 in the past 30 days. The estimated figure indicates a 16.3% decline from $4.12 per share reported in the year-ago quarter.

Factors to Note

Despite challenging affordability conditions due to higher mortgage rates, M/I Homes' second-quarter earnings and net sales are likely to have increased year over year due to strong demand for entry-level and first-move-up homes. The lack of existing homes for sale is likely to have boosted the top line. MHO's focus on single-family homes and attached townhomes for various buyer segments, including first-time, millennial, move-up, empty-nester and luxury buyers, is likely to have driven growth.

Also, improved construction cycle time and solid land acquisitions and development strategy are likely to have helped it partially offset the negative impacts of the headwinds mentioned above.

The Zacks Consensus Estimate for Homebuilding revenues (which contributed 97.7% to total revenues in 2023) of $1,024.9 million suggests a rise from $988.7 million reported a year ago.

The company expects homes delivered in the second quarter to be in line with the first quarter (homes delivered totaled 2,158 units), with a slight increase in the second half of the year. The consensus mark for homes delivered is pegged at 2,170 units, indicating a rise from 1,990 units a year ago. The same for the average home closing price is likely to be $528,380, suggesting a rise from $493,000 reported a year ago.

The Zacks Consensus Estimate for new contracts is pegged at 2,307 homes, calling for an increase from 2,197 homes reported a year ago.

The Zacks Consensus Estimate for backlog is pinned at 3,528 homes, suggesting a rise from 3,508 homes reported in the prior year.

The same for Financial Services (contributed 2.3% to total revenues in 2023) revenues is pinned at $26.6 million, suggesting a rise from the year-ago level of $25.3 million.

However, higher material and labor costs, along with uncertain economic conditions, are likely to have negatively impacted operations and hurt margins in the to-be-reported quarter. Elevated selling expenses and greater headcount and incentive compensation are anticipated to have strained MHO's profitability.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for MHO this time around. A 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. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: The company has an Earnings ESP of 0.00%.

Zacks Rank: It currently carries a Zacks Rank #3.

Stocks Poised to Beat on Earnings

Here are some companies in the Zacks Construction sector that, according to our model, have the right combination of elements to post an earnings beat in the quarter to be reported.

Dycom Industries DY currently has an Earnings ESP of +4.43 and a Zacks Rank of 2.

DY's earnings topped the consensus mark in three of the last four quarters and missed on one occasion, with the average surprise being 30.2%. Earnings for the to-be-reported quarter are expected to increase 7.4% from the year-ago quarter's reported figure.

KB Home KBH currently has an Earnings ESP of +0.17% and a Zacks Rank of 1.

KBH's earnings for the to-be-reported quarter are expected to grow 13.3% from the year-ago quarter's reported figure. The company posted better-than-expected earnings in all the last four quarters, the average surprise being 18.4%.

AAON, Inc. AAON currently has an Earnings ESP of +0.94% and a Zacks Rank of 2.

AAON's earnings for the to-be-reported quarter are expected to decline 1.8% from the year-ago quarter's reported figure. The company reported better-than-expected earnings in three of the trailing four quarters and missed on one occasion, the average surprise being 9.7%.

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