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In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 14.3% and 10.2%, respectively. Yet, earnings and revenues of this homebuilding company grew 28.9% and 14% from the year-ago reported figures.
Markedly, D.R. Horton reported better-than-expected earnings in 20 of the last 21 quarters.
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has remained unchanged at $3.80 over the past 30 days. The estimated figure indicates a 2.6% decrease from the year-ago EPS of $3.90. The consensus mark for revenues is $9.68 billion, indicating a 0.4% year-over-year decline.
Factors to Note
D.R. Horton’s total revenues in the fiscal third quarter might have registered weakness from its Forestar and Rental Property segments. DHI anticipates total revenues of $9.5-$9.7 billion for the fiscal third quarter (compared with $9.73 billion a year ago). Also, lower average selling prices (ASPs) for homes delivered is an added headwind.
Nonetheless, D.R. Horton’s Homebuilding revenues are expected to have improved in the fiscal third quarter from the year-ago level owing to a higher number of homes closed, given a lack of existing homes for sale in the market. Also, the company’s industry-leading market share, acquisitions, broad geographic footprint and affordable product offerings across multiple brands might have somewhat aided the top line.
Our model predicts Homebuilding revenues to grow 2% year over year to $8.91 billion in the to-be-reported quarter. The metric is expected to have improved from the $8.47 billion reported in the prior quarter. The average selling price of homes closed is expected to be down 0.9% year over year to $375,100 in the fiscal third quarter. The company expects homes closed to be within 23,500-24,000 units. Our model predicts homes closed to be 23,680 units, up 3% year over year and 5% sequentially.
We expect Financial Services revenues of $235.4 million, which indicates an increase of 3% from the year-ago level of $228.5 million.
We expect Rental Property revenues of $373.6 million, which implies a 44% decline from the year-ago level of $667.1 million. The company expects rental revenues in the fiscal third quarter to be similar to the fiscal second quarter. We expect Forestar revenues of $355.4 million, which suggests a 3.6% decline from the year-ago level.
Other Projections
Meanwhile, higher land, labor and material costs are expected to have reflected in the fiscal third-quarter margins. The tight labor market is a concern. DHI expects the home sales gross margin for the fiscal third quarter to be in the range of 23-23.5%. Our model predicts home sales gross margins to remain flat year over year at 23.3% in the fiscal third quarter.
DHI expects homebuilding SG&A, as a percentage of revenues, of approximately 7% (versus 6.7% reported a year ago). Financial Services pretax profit margin is likely to be in the range of 30-35%, and the income tax rate is expected to be 24% in the quarter. We expect homebuilding SG&A to be 7% of homebuilding revenues and Financial Services pretax profit margin to be 34.1% for the quarter.
Our model predicts net sales orders to increase 7.5% year over year to 24,606 units. The same for backlog is currently pegged at 18,798 units, which indicates a decrease from 19,186 units reported a year ago. Our model predicts the value of the backlog to be $7.56 billion, implying growth from $7.45 billion in the corresponding fiscal 2023 quarter.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for D.R. Horton for the quarter to be reported. 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 exactly the case here, as you will see below.
Earnings ESP: DHI has an Earnings ESP of +4.68%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: D.R. Horton currently carries a Zacks Rank #2.
Stocks With Favorable Combinations
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 on their respective quarters to be reported.
MTH’s earnings topped the consensus mark in all the last four quarters, with the average being 27%. Earnings for the to-be-reported quarter are expected to grow 3% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +3.90% and carries a Zacks Rank #2.
DY’s earnings beat the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 30.2%. Earnings for the to-be-reported quarter are expected to grow 6.4% year over year.
Fluor Corporation (FLR - Free Report) has an Earnings ESP of +0.48% and carries a Zacks Rank #2.
FLR’s earnings surpassed the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 51.3%. Earnings for the to-be-reported quarter are expected to decrease 7.9% year over year.
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Is a Beat in Store for D.R. Horton (DHI) This Earnings Season?
D.R. Horton Inc. (DHI - Free Report) is slated to report third-quarter fiscal 2024 (ended Jun 30, 2024) results on Jul 18, before the opening bell.
In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 14.3% and 10.2%, respectively. Yet, earnings and revenues of this homebuilding company grew 28.9% and 14% from the year-ago reported figures.
Markedly, D.R. Horton reported better-than-expected earnings in 20 of the last 21 quarters.
D.R. Horton, Inc. Price and EPS Surprise
D.R. Horton, Inc. price-eps-surprise | D.R. Horton, Inc. Quote
The Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has remained unchanged at $3.80 over the past 30 days. The estimated figure indicates a 2.6% decrease from the year-ago EPS of $3.90. The consensus mark for revenues is $9.68 billion, indicating a 0.4% year-over-year decline.
Factors to Note
D.R. Horton’s total revenues in the fiscal third quarter might have registered weakness from its Forestar and Rental Property segments. DHI anticipates total revenues of $9.5-$9.7 billion for the fiscal third quarter (compared with $9.73 billion a year ago). Also, lower average selling prices (ASPs) for homes delivered is an added headwind.
Nonetheless, D.R. Horton’s Homebuilding revenues are expected to have improved in the fiscal third quarter from the year-ago level owing to a higher number of homes closed, given a lack of existing homes for sale in the market. Also, the company’s industry-leading market share, acquisitions, broad geographic footprint and affordable product offerings across multiple brands might have somewhat aided the top line.
Our model predicts Homebuilding revenues to grow 2% year over year to $8.91 billion in the to-be-reported quarter. The metric is expected to have improved from the $8.47 billion reported in the prior quarter. The average selling price of homes closed is expected to be down 0.9% year over year to $375,100 in the fiscal third quarter. The company expects homes closed to be within 23,500-24,000 units. Our model predicts homes closed to be 23,680 units, up 3% year over year and 5% sequentially.
We expect Financial Services revenues of $235.4 million, which indicates an increase of 3% from the year-ago level of $228.5 million.
We expect Rental Property revenues of $373.6 million, which implies a 44% decline from the year-ago level of $667.1 million. The company expects rental revenues in the fiscal third quarter to be similar to the fiscal second quarter. We expect Forestar revenues of $355.4 million, which suggests a 3.6% decline from the year-ago level.
Other Projections
Meanwhile, higher land, labor and material costs are expected to have reflected in the fiscal third-quarter margins. The tight labor market is a concern. DHI expects the home sales gross margin for the fiscal third quarter to be in the range of 23-23.5%. Our model predicts home sales gross margins to remain flat year over year at 23.3% in the fiscal third quarter.
DHI expects homebuilding SG&A, as a percentage of revenues, of approximately 7% (versus 6.7% reported a year ago). Financial Services pretax profit margin is likely to be in the range of 30-35%, and the income tax rate is expected to be 24% in the quarter. We expect homebuilding SG&A to be 7% of homebuilding revenues and Financial Services pretax profit margin to be 34.1% for the quarter.
Our model predicts net sales orders to increase 7.5% year over year to 24,606 units. The same for backlog is currently pegged at 18,798 units, which indicates a decrease from 19,186 units reported a year ago. Our model predicts the value of the backlog to be $7.56 billion, implying growth from $7.45 billion in the corresponding fiscal 2023 quarter.
What the Zacks Model Unveils
Our proven model predicts an earnings beat for D.R. Horton for the quarter to be reported. 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 exactly the case here, as you will see below.
Earnings ESP: DHI has an Earnings ESP of +4.68%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: D.R. Horton currently carries a Zacks Rank #2.
Stocks With Favorable Combinations
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 on their respective quarters to be reported.
Meritage Homes Corporation (MTH - Free Report) has an Earnings ESP of +0.64% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
MTH’s earnings topped the consensus mark in all the last four quarters, with the average being 27%. Earnings for the to-be-reported quarter are expected to grow 3% year over year.
Dycom Industries (DY - Free Report) has an Earnings ESP of +3.90% and carries a Zacks Rank #2.
DY’s earnings beat the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 30.2%. Earnings for the to-be-reported quarter are expected to grow 6.4% year over year.
Fluor Corporation (FLR - Free Report) has an Earnings ESP of +0.48% and carries a Zacks Rank #2.
FLR’s earnings surpassed the consensus mark in three of the last four quarters and missed on one occasion, the average surprise being 51.3%. Earnings for the to-be-reported quarter are expected to decrease 7.9% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.