M.D.C. Holdings' second quarter earnings were so well received on Wall Street this summer that they're likely to be a tough act to follow in the third quarter; the company plans to release 3Q2009 results Friday before market opens. However, despite the challenges, Wall Street analysts are guessing that the company's performance will not only hold steady but improve. Analysts estimated the company would see an average $0.37 loss per share for the quarter, compared with a loss of $0.64 per share last quarter and a $2.55 per-share loss a year ago.

With its balance sheet rock solid--the company has $1.6 billion in cash in its coffers, about $1 billion in debt, and no maturities until 2012--orders and margins will be the measures of a successful quarter. In 2Q2009, M.D.C. saw its first year-over-year increase in orders since 2005 and managed to log one of the highest gross margins--an impressive 18%­-relative to peers.

About the only thing analysts had to grouse about last quarter was the company's SG&A numbers, which were high at roughly 26% of revenues. However, it's unlikely that there will have been any significant reduction in SG&A during the third quarter as management appeared less concerned about the elevated level, sticking to its belief that it needs to preserve its talent infrastructure for the recovery cycle.

But whether order growth and thick margins are sustainable both in the near and medium term is more up for debate. Some of M.D.C. Peers--KB Home, for one--posted strong results during their third quarters while others, like The Ryland Group, experienced more lackluster results.

However, M.D.C. has a few operational tactics that could've worked for them big time during the quarter. First, the company continued to roll out its new, smaller, more affordable home product. Last quarter, sales of the new product accounted for just 10% of the quarter's sales, but it is expected that the percentage will have grown during the third quarter, resulting in better sales pace and good margins.

Second, the company's new spec strategy, which is to halt spec construction at the drywall stage until a buyer is found for the home, also could give the company's orders and closing numbers a lift. The strategy allows the company to both meet market demand for quick move-in homes while preserving some of the margins that come with buyers personalizing their homes with design center options.

Analysts also will be anxious to hear if the company has entered what has become the land buying fray in select markets. With nearly $1 billion available on its balance sheet for land spend, the company has a lot of capacity to begin to restock its land pipeline with less expensive lots. However, it's likely that management's conservative nature will have prevailed in the quarter, limiting the company's role in any bidding wars for finished lots. As CEO Larry Mizel reminded analysts during last quarter's call, "You can buy in 10 minutes what you can't sell in a lifetime."