A month has gone by since the last earnings report for D.R. Horton (DHI Quick QuoteDHI - Free Report) . Shares have added about 9.7% in that time frame, outperforming the S&P 500.

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

D.R. Horton’s Q4 Earnings Beat Estimates

D.R. Horton reported solid fourth-quarter fiscal 2023 (ended Sep 30, 2023) results as earnings and revenues surpassed their respective Zacks Consensus Estimate.

On a year-over-year basis, the top line increased on the back of the supply of both new and existing homes as affordable price points remain limited and robust housing demand supported by favorable demographics.

Earnings, Revenue & Margin Discussion

D.R. Horton reported adjusted earnings of $4.45 per share for the fiscal fourth quarter, beating the Zacks Consensus Estimate of $3.98 by 11.8% but decreasing 4.7% from the year-ago figure of $4.67.

Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $10.5 billion, up 9% year over year. The reported figure topped the consensus mark of $10.07 billion by 4.3%.
Consolidated pre-tax margin came in at 19.2% for the quarter.

Segment Details

Homebuilding revenues of $8.8 billion decreased from $9.39 billion in the prior-year quarter. Home sales were $8.78 billion, down from $9.37 billion reported a year ago. Home closings were down 1% from the prior-year quarter to 22,928 homes. Net sales orders rose 39% year over year to 18,939 homes. The value of net orders also increased by 34% year over year to $7.3 billion. The cancellation rate (on gross sales orders) was 21%, improved from 32% a year ago. The order backlog of homes at the end of fiscal 2023 was 15,197, down 23% year over year. The value of the backlog was down 26% from the prior year to $5.9 billion.

Financial Services revenues decreased 63.6% from the year-ago level to $219.5 million.

Forestar contributed $549.7 million to total quarterly revenues with 4,986 lots sold, reflecting a growth from $381.4 million in revenues generated a year ago on 3,914 lots sold.

The Rental business generated revenues of $1.39 billion for the quarter compared with $21.1 million a year ago.

Fiscal 2023 Highlights

Earnings came in at $13.82 per share, reflecting a 16% decline from a year ago. Total revenues were $35.5 billion, up 6% from fiscal 2022.

Deliveries were up to 82,917 from 82,744 units reported a year ago. Deliveries in value were down to $31.6 billion from $31.9 billion reported in prior year. Net sales orders were up 3% year over year to 78,342 homes. The value of net orders declined 3% year over year to $29.5 billion.

Balance Sheet Details

D.R. Horton’s cash, cash equivalents and restricted cash totaled $3.9 billion as of Sep 30, 2023 compared with $2.57 billion at the end of fiscal 2022. It had $3.6 billion of available capacity on the revolving credit facility at the end of 2023. Total homebuilding liquidity was $7.5 billion.

At the end of September 2023, the company had 42,000 homes in inventory, of which 27,000 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 568,400 lots at the fiscal year’s end. Of these, 25% were owned and 75% were controlled through land and lot purchase contracts.

At the end of fiscal 2023, debt totaled $5.09 billion, with a debt to total capital of 18.3%. The trailing 12-month return on equity was 22.7%.

D.R. Horton repurchased 3.5 million shares of common stock for $423.1 million during the fiscal fourth quarter. For the year, the company repurchased 11.1 million shares of common stock for $1.2 billion. In October, its board authorized $1.5 billion shares of common stock, replacing the previous authorization ($32.8 million remaining of $234.0 million at the time of authorization due to repurchases made subsequent to year-end).

Fiscal 2024 Views

D.R. Horton expects consolidated revenues to be in the range of $36-$37 billion. Homes closed are anticipated within 86,000-89,000 units. The income tax rate is expected in the range of 24-24.5%.

Fiscal 2024 cash flow from homebuilding operations is expected to be nearly $3 billion. Share repurchases are projected at approximately $1.5 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, D.R. Horton has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, D.R. Horton has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

D.R. Horton is part of the Zacks Building Products - Home Builders industry. Over the past month, Meritage Homes (MTH Quick QuoteMTH - Free Report) , a stock from the same industry, has gained 12.9%. The company reported its results for the quarter ended September 2023 more than a month ago.

Meritage reported revenues of $1.61 billion in the last reported quarter, representing a year-over-year change of +2.2%. EPS of $5.98 for the same period compares with $7.10 a year ago.

Meritage is expected to post earnings of $5.24 per share for the current quarter, representing a year-over-year change of -26.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Meritage. Also, the stock has a VGM Score of B.