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Why Is D.R. Horton (DHI) Down 1.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for D.R. Horton (DHI - Free Report) . Shares have lost about 1.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is D.R. Horton due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
D.R. Horton Q2 Earnings & Revenues Beat Estimates
D.R. Horton’s second-quarter fiscal 2022 earnings and revenues beat the respective Zacks Consensus Estimate, as well as improved on a year-over-year basis. The company increased its revenue guidance for the full year, depicting DHI’s industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.
Pertaining to fiscal second-quarter results, Donald R. Horton, the chairman of the board, said, “Housing market conditions remain strong despite the rise in mortgage rates, as we continue to experience homebuyer demand that exceeds our pace of supply. We are still selling homes later in the construction cycle to better ensure the certainty of the home close date for our homebuyers, and we are continuing to work to stabilize and then reduce our construction cycle times to historical norms. With 33,900 homes in backlog, 59,800 homes in inventory, a robust lot supply and strong trade and supplier relationships, we are well-positioned to grow our consolidated revenues by more than 25% in fiscal 2022.”
Earnings & Revenue Discussion
DHI’s adjusted earnings of $4.03 per share for the quarter surpassed the Zacks Consensus Estimate of $3.37 by 19.6% and increased a whopping 59% from the year-ago period.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $8 billion, up 24.1% year over year. The reported figure surpassed the consensus mark of $7.62 billion.
Segment Details
Homebuilding revenues of $7.51 billion increased 21.4% from the prior-year quarter. The upside was led by higher pricing.
Home closings inched up 1% from the prior-year quarter to 19,828 homes but homes closed increased 21.5% in value to $7.5 billion. Net sales orders declined 10% year over year to 24,340 homes. Nonetheless, the value of net orders advanced 10.2% year over year to $9.7 billion. The cancellation rate was 16%, up from 15% a year ago. Order backlog of homes at quarter-end was 33,859 homes, down 5.5% year over year. Nonetheless, the value of the backlog was up 14.6% from the prior year to $13.31 billion.
Financial Services’ revenues decreased 1.3% from the year-ago level to $222.1 million.
Forestar contributed $421.6 million to total quarterly revenues, reflecting an improvement from $287.1 million a year ago.
The Rental business generated revenues of $222.9 million for the quarter.
Margins
Consolidated pre-tax margin expanded 520 basis points to 23.5% for the quarter.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $1.69 billion as of Mar 31, 2022 compared with $3.24 billion at fiscal 2021-end. At fiscal second quarter-end, it had $2 billion of available capacity on the revolving credit facility. Total homebuilding liquidity was $3.2 billion. At fiscal second quarter-end, DHI had 59,800 homes in inventory, of which 26,000 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 574,000 lots at fiscal second quarter-end. Of these, 23% were owned, and 77% were controlled through land and lot purchase contracts. At March-end, homebuilding debt totaled $3.3 billion, with homebuilding debt-to-total capital of 16.4%. The trailing 12-month return on equity was 34%. D.R. Horton repurchased 3.1 million shares of common stock for $266 million during the fiscal second quarter. The company’s remaining stock repurchase authorization as of Mar 31, 2022 totaled $2 million.
Fiscal 2022 Guidance Updated
Total revenues are now expected in the range of $35.3-$36.1 billion versus $34.5-$35.5 billion projected earlier. Homes closed are anticipated within 88,000-90,000 units versus 90,000-92,000 units expected earlier. The income tax rate is expected to be 24%. The company expects shares outstanding to be 3% lower than fiscal 2021-end.
Q3 Guidance
Total revenues are expected in the range of $8.6-$9 billion. Meanwhile, homes closed are anticipated within 21,500-22,500 units. Home sales gross margin and homebuilding SG&A are expected to be 29-29.5% and 6.6%, respectively. The income tax rate is expected to be 24%. The company also expects financial services pre-tax profit margin to be about 40%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, D.R. Horton has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been 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.
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Why Is D.R. Horton (DHI) Down 1.6% Since Last Earnings Report?
It has been about a month since the last earnings report for D.R. Horton (DHI - Free Report) . Shares have lost about 1.6% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is D.R. Horton due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
D.R. Horton Q2 Earnings & Revenues Beat Estimates
D.R. Horton’s second-quarter fiscal 2022 earnings and revenues beat the respective Zacks Consensus Estimate, as well as improved on a year-over-year basis. The company increased its revenue guidance for the full year, depicting DHI’s industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.
Pertaining to fiscal second-quarter results, Donald R. Horton, the chairman of the board, said, “Housing market conditions remain strong despite the rise in mortgage rates, as we continue to experience homebuyer demand that exceeds our pace of supply. We are still selling homes later in the construction cycle to better ensure the certainty of the home close date for our homebuyers, and we are continuing to work to stabilize and then reduce our construction cycle times to historical norms. With 33,900 homes in backlog, 59,800 homes in inventory, a robust lot supply and strong trade and supplier relationships, we are well-positioned to grow our consolidated revenues by more than 25% in fiscal 2022.”
Earnings & Revenue Discussion
DHI’s adjusted earnings of $4.03 per share for the quarter surpassed the Zacks Consensus Estimate of $3.37 by 19.6% and increased a whopping 59% from the year-ago period.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $8 billion, up 24.1% year over year. The reported figure surpassed the consensus mark of $7.62 billion.
Segment Details
Homebuilding revenues of $7.51 billion increased 21.4% from the prior-year quarter. The upside was led by higher pricing.
Home closings inched up 1% from the prior-year quarter to 19,828 homes but homes closed increased 21.5% in value to $7.5 billion. Net sales orders declined 10% year over year to 24,340 homes. Nonetheless, the value of net orders advanced 10.2% year over year to $9.7 billion. The cancellation rate was 16%, up from 15% a year ago. Order backlog of homes at quarter-end was 33,859 homes, down 5.5% year over year. Nonetheless, the value of the backlog was up 14.6% from the prior year to $13.31 billion.
Financial Services’ revenues decreased 1.3% from the year-ago level to $222.1 million.
Forestar contributed $421.6 million to total quarterly revenues, reflecting an improvement from $287.1 million a year ago.
The Rental business generated revenues of $222.9 million for the quarter.
Margins
Consolidated pre-tax margin expanded 520 basis points to 23.5% for the quarter.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $1.69 billion as of Mar 31, 2022 compared with $3.24 billion at fiscal 2021-end. At fiscal second quarter-end, it had $2 billion of available capacity on the revolving credit facility. Total homebuilding liquidity was $3.2 billion. At fiscal second quarter-end, DHI had 59,800 homes in inventory, of which 26,000 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 574,000 lots at fiscal second quarter-end. Of these, 23% were owned, and 77% were controlled through land and lot purchase contracts. At March-end, homebuilding debt totaled $3.3 billion, with homebuilding debt-to-total capital of 16.4%. The trailing 12-month return on equity was 34%. D.R. Horton repurchased 3.1 million shares of common stock for $266 million during the fiscal second quarter. The company’s remaining stock repurchase authorization as of Mar 31, 2022 totaled $2 million.
Fiscal 2022 Guidance Updated
Total revenues are now expected in the range of $35.3-$36.1 billion versus $34.5-$35.5 billion projected earlier. Homes closed are anticipated within 88,000-90,000 units versus 90,000-92,000 units expected earlier. The income tax rate is expected to be 24%. The company expects shares outstanding to be 3% lower than fiscal 2021-end.
Q3 Guidance
Total revenues are expected in the range of $8.6-$9 billion. Meanwhile, homes closed are anticipated within 21,500-22,500 units. Home sales gross margin and homebuilding SG&A are expected to be 29-29.5% and 6.6%, respectively. The income tax rate is expected to be 24%. The company also expects financial services pre-tax profit margin to be about 40%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, D.R. Horton has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been 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.