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Can D.R. Horton (DHI) Spring a Surprise in Q1 Earnings?
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D.R. Horton Inc. (DHI - Free Report) , one of the top builders in the U.S., is scheduled to report first-quarter fiscal 2017 results on Jan 24, before the opening bell.
Last quarter, the company posted a negative earnings surprise of 2.60%. Also, the company surpassed estimates in three out of the past four quarters, resulting in an average positive surprise of 2.01%.
Let’s see how things are shaping up prior to this announcement.
Factors to Consider
As revealed during the fourth quarter of fiscal 2016 earnings call, D.R. Horton expects that its number of homes closed will approximate the beginning backlog conversion rate in the range of 76% to 80% in the to-be reported quarter.
Again, it anticipates first-quarter home sales gross margin at around 20%, slightly higher than 19.9% recorded a year ago. The company’s order trend remained solid over the past few quarters and is expected to be maintained in the soon-to-be reported quarter as well.
Management expects investments in land and development to increase in the current fiscal. In fiscal 2016, its total investment grew 23% over the 2015 level. D.R. Horton plans to boost its investments to replenish its land and lot supply in 2017 to support top line growth.
For the financial services segment, the company expects its financial services operating margin to be around 30% for the year, with the first two quarters of the year lower than 30% and the third and fourth quarters higher than 30%.
Overall, D.R. Horton continues to maintain a positive outlook with revenues and profits expected to increase double digits in fiscal 2017 annually.
For the fiscal first quarter, the Zacks Consensus Estimate for earnings is pegged at 47 cents, reflecting a 12.9% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $2.71 billion, implying a 12.3% rise.
Earnings Whisper
Our proven model does not conclusively show that D.R. Horton is likely to beat on earnings this quarter. This 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. However, that is not the case here as you will see below
Zacks ESP: D.R. Horton’s Earnings ESP is 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 47 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: D.R. Horton’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Here are some companies in the broader construction sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:
The company is expected to release its quarterly results on Feb 28.
Thor Industries Inc. (THO - Free Report) has an Earnings ESP of +2.40% and a Zacks Rank #1. The company will likely release its quarterly results on Mar 6.
M.D.C. Holdings Inc. has an Earnings ESP of +8.82% and a Zacks Rank #2. The company is slated to report fourth-quarter 2016 results on Feb 1.
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Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>
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Can D.R. Horton (DHI) Spring a Surprise in Q1 Earnings?
D.R. Horton Inc. (DHI - Free Report) , one of the top builders in the U.S., is scheduled to report first-quarter fiscal 2017 results on Jan 24, before the opening bell.
Last quarter, the company posted a negative earnings surprise of 2.60%. Also, the company surpassed estimates in three out of the past four quarters, resulting in an average positive surprise of 2.01%.
Let’s see how things are shaping up prior to this announcement.
Factors to Consider
As revealed during the fourth quarter of fiscal 2016 earnings call, D.R. Horton expects that its number of homes closed will approximate the beginning backlog conversion rate in the range of 76% to 80% in the to-be reported quarter.
Again, it anticipates first-quarter home sales gross margin at around 20%, slightly higher than 19.9% recorded a year ago. The company’s order trend remained solid over the past few quarters and is expected to be maintained in the soon-to-be reported quarter as well.
Management expects investments in land and development to increase in the current fiscal. In fiscal 2016, its total investment grew 23% over the 2015 level. D.R. Horton plans to boost its investments to replenish its land and lot supply in 2017 to support top line growth.
For the financial services segment, the company expects its financial services operating margin to be around 30% for the year, with the first two quarters of the year lower than 30% and the third and fourth quarters higher than 30%.
Overall, D.R. Horton continues to maintain a positive outlook with revenues and profits expected to increase double digits in fiscal 2017 annually.
For the fiscal first quarter, the Zacks Consensus Estimate for earnings is pegged at 47 cents, reflecting a 12.9% year-over-year increase. Meanwhile, our estimate for revenues is pegged at $2.71 billion, implying a 12.3% rise.
Earnings Whisper
Our proven model does not conclusively show that D.R. Horton is likely to beat on earnings this quarter. This 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. However, that is not the case here as you will see below
Zacks ESP: D.R. Horton’s Earnings ESP is 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 47 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: D.R. Horton’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.
Note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
D.R. Horton Inc. Price and EPS Surprise
D.R. Horton Inc. Price and EPS Surprise | D.R. Horton Inc. Quote
Stocks to Consider
Here are some companies in the broader construction sector that can be considered as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Toll Brothers Inc. (TOL - Free Report) has an Earnings ESP of +8.57% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is expected to release its quarterly results on Feb 28.
Thor Industries Inc. (THO - Free Report) has an Earnings ESP of +2.40% and a Zacks Rank #1. The company will likely release its quarterly results on Mar 6.
M.D.C. Holdings Inc. has an Earnings ESP of +8.82% and a Zacks Rank #2. The company is slated to report fourth-quarter 2016 results on Feb 1.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>