KB Home KBH is slated to report fourth-quarter fiscal 2021 results on Jan 12, after market close.

In the last reported quarter, its earnings topped the Zacks Consensus Estimate by 2.5% and grew 97.6% from the year-ago period. The company's earnings topped analysts’ expectations in 22 of the trailing 23 quarters. Yet, its top line missed the consensus mark by 6% but improved 46.9% year over year.

Trend in Estimate Revision

For the quarter to be reported, the Zacks Consensus Estimate has remained stable over the past 60 days at $1.77 per share. This indicates a 58% increase from the year-ago earnings of $1.12 per share. The consensus estimate for revenues is pegged at $1.72 billion, suggesting a rise of 43.7% from the prior-year quarter.

Factors at Play

Revenues: KB Home’s housing revenues are expected to have improved in the fiscal fourth quarter from the year-ago level on higher deliveries, as lower borrowing costs, improved economy, more governmental stimulus and vaccination drive have been encouraging buyers.

The Zacks Consensus Estimate for the company’s Homebuilding revenues — including housing and land — is pegged at $1.71 billion, which indicates an increase of 43.6% from the year-ago period. Within Homebuilding, the consensus mark for housing revenues is $1,709 million, indicating a rise of more than 43% from the prior-year period. The same for land revenues is pegged at $0.8 million. It expects housing revenues in the range of $1.65-$1.75 billion.

In addition to solid deliveries, higher pricing is expected to have been a major contributing factor. The consensus estimate for average selling price is $450K, indicating growth from $414K reported a year ago. For the quarter, the company expects ASP of $450,000.

The consensus estimate for homes delivered is pegged at 3,791 units, suggesting growth of 31.8% from the year-ago level.

The consensus mark for Financial Services indicates growth of 25% year over year.

Orders & Backlogs: A solid backlog level, which is a key indicator of significant growth opportunities, is likely to have been a positive. The consensus estimate for backlog is 10,559 units, implying notable growth from 7,810 units reported in the prior year.

Yet, the consensus mark for new orders is currently pegged at 3,656 units, suggesting a 7.1% year-over-year decline.

Margins: Higher average sales and strong demand are likely to have expanded margins in the to-be-reported quarter. Although higher material and labor costs are likely to have put pressure on the bottom line, its initiatives like the Returns-Focused Growth Plan, Built-to-Order approach, and aggressive investments in land acquisition as well as development are likely to have somewhat offset those headwinds.

The company expects homebuilding operating income margin (excluding the impact of any inventory-related charges) to improve 11.8% for the quarter, suggesting an increase from 10.7% a year ago. Assuming no inventory-related charges, KB Home expects fiscal fourth-quarter housing gross margin in the range of 21.6-22%. SG&A expense ratio will be approximately 10%, suggesting an improvement from 10.3% in the year-ago period.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for KB Home this time around. That 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. This is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: The Earnings ESP for KB Home is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: KB Home currently has a Zacks Rank #3.

Stocks With Favorable Combination

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.

Weyerhaeuser Company WY is one of the leading U.S. forest product companies. The company has been benefiting from solid new residential construction activity, which in turn is leading to improved demand. Also, its focus on operational excellence has been advantageous over time.

WY, which currently sports a Zacks Rank #1, has an Earnings ESP of +5.44%.

Vulcan Materials Company VMC produces and supplies construction aggregates, asphalt mix as well as ready-mixed concrete. The company’s focus on four strategic initiatives — Commercial Excellence, Operational Excellence, Strategic Sourcing, and Logistics Innovation — will enhance price performance as well as operating efficiencies. Vulcan Materials has been generating higher earnings despite tepid revenues on the back of prudent cost-control efforts and increased pricing in aggregates. Its focus on a systematic inorganic strategy for expansion is adding to the positives.

VMC has an Earnings ESP of +6.01% and holds a Zacks Rank #2.

Stamford, CT-based United Rentals, Inc. URI is the largest equipment rental company in the world, with an integrated network of 1,278 rental locations in the United States, Canada and Europe. URI primarily banks on broad-based growth across AYI’s verticals, with persistent growth opportunities for certain non-residential verticals including datacenter, healthcare and warehouse projects.

URI has an Earnings ESP of +6.41% and currently carries a Zacks Rank #2.

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