We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Will Higher Demand Aid D.R. Horton's (DHI) Q3 Earnings?
Read MoreHide Full Article
D.R. Horton Inc. (DHI - Free Report) is scheduled to report third-quarter fiscal 2018 results on Jul 26, before the opening bell. Similar to other homebuilders, D.R. Horton is well poised to gain traction on current positive housing scenario. Steady job and wage growth, a recovering economy, rising rentals, rapidly increasing household formation and a limited supply of inventory point toward strong demand in 2018.
In the last reported quarter, the homebuilder delivered a positive earnings surprise of 5.81%. The company surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, with the average being 6.86%.
However, a limited supply of homes for sale, rising rates and higher material prices have raised concerns among investors. Evidently, the homebuilding industry’s share price performance has not been encouraging so far this year. Resultantly, shares of D.R. Horton, one of the top builders in the United States, have decreased 15.3% so far this year, almost on par with its industry’s 15.1% decline.
Let’s See How Things are Shaping Up for This Announcement
Higher Demand to Boost Top Line: D.R. Horton’s well-stocked supply of land, plots and homes lends it a strong competitive position to meet the growing demand in the upcoming quarters, thereby driving sales and home closings. This helped the company achieve double-digit annual growth in both revenues and pre-tax profits, while generating annual positive operating cash flow and increasing returns. Homebuilding revenues in the first six months of fiscal 2018 increased 15% year over year to $6.9 billion on 15% growth in homes closed.
For the fiscal third quarter, the company had earlier projected backlog conversion in the range of 87-89%.
For the to-be-reported quarter, the Zacks Consensus Estimate for Homebuilding revenues (comprising about 97% of the total revenues) of $4,152 million indicates an increase from $3,164 million in the last quarter and $3,685 million in the year-ago period.
The consensus estimate for net sales orders of 14,749 units reflects an increase from 13,040 units a year ago but a decrease from 15,828 units in the last reported quarter. Home closings are estimated to be 14,012 units compared with 12,497 units a year ago.
Overall, the Zacks Consensus Estimate for total revenues stands at $4.33 billion, implying 14.6% year-over-year growth.
Cost Reduction to Improve Margins: Management has been consistently making efforts to reduce both construction, and selling, general and administrative (SG&A) expenses. It keeps construction costs under check by designing homes efficiently, and also via obtaining construction materials and labor at competitive prices.
D.R. Horton expects home sales gross margin within 20.5-21% compared with 19.8% in the year-ago quarter. In the fiscal second quarter, the company’s gross margin on home sales expanded 100 basis points year over year to 20.8%.
Meanwhile, it expects SG&A expenses, as a percentage of homebuilding revenues, in the range of 8.2-8.3%. This compares favorably with the year-ago level of 8.4%.
Overall, D.R. Horton remains well poised to gain traction on the current positive housing scenario. For fiscal third quarter, the Zacks Consensus Estimate for earnings is pegged at $1.08 per share, reflecting a solid increase of 42.1% year over year.
What the Zacks Model Says
Our proven model does not show that D.R. Horton is likely to beat estimates in the quarter to be reported. 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.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: D.R. Horton has an Earnings ESP of +1.17%.
Zacks Rank: D.R. Horton currently carries a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks to Consider
Here are some companies in the construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported:
The company is expected to report quarterly results on Aug 2, 2018.
Foundation Building Materials, Inc. has an Earnings ESP of +21.05% and carries a Zacks Rank #2. The company is expected to report quarterly numbers on Aug 2, 2018.
Louisiana-Pacific Corporation (LPX - Free Report) has an Earnings ESP of +8.62% and sports a Zacks Rank #1. The company is slated to report quarterly numbers on Aug 7, 2018.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Will Higher Demand Aid D.R. Horton's (DHI) Q3 Earnings?
D.R. Horton Inc. (DHI - Free Report) is scheduled to report third-quarter fiscal 2018 results on Jul 26, before the opening bell. Similar to other homebuilders, D.R. Horton is well poised to gain traction on current positive housing scenario. Steady job and wage growth, a recovering economy, rising rentals, rapidly increasing household formation and a limited supply of inventory point toward strong demand in 2018.
In the last reported quarter, the homebuilder delivered a positive earnings surprise of 5.81%. The company surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, with the average being 6.86%.
However, a limited supply of homes for sale, rising rates and higher material prices have raised concerns among investors. Evidently, the homebuilding industry’s share price performance has not been encouraging so far this year. Resultantly, shares of D.R. Horton, one of the top builders in the United States, have decreased 15.3% so far this year, almost on par with its industry’s 15.1% decline.
Let’s See How Things are Shaping Up for This Announcement
Higher Demand to Boost Top Line: D.R. Horton’s well-stocked supply of land, plots and homes lends it a strong competitive position to meet the growing demand in the upcoming quarters, thereby driving sales and home closings. This helped the company achieve double-digit annual growth in both revenues and pre-tax profits, while generating annual positive operating cash flow and increasing returns. Homebuilding revenues in the first six months of fiscal 2018 increased 15% year over year to $6.9 billion on 15% growth in homes closed.
For the fiscal third quarter, the company had earlier projected backlog conversion in the range of 87-89%.
For the to-be-reported quarter, the Zacks Consensus Estimate for Homebuilding revenues (comprising about 97% of the total revenues) of $4,152 million indicates an increase from $3,164 million in the last quarter and $3,685 million in the year-ago period.
The consensus estimate for net sales orders of 14,749 units reflects an increase from 13,040 units a year ago but a decrease from 15,828 units in the last reported quarter. Home closings are estimated to be 14,012 units compared with 12,497 units a year ago.
Overall, the Zacks Consensus Estimate for total revenues stands at $4.33 billion, implying 14.6% year-over-year growth.
Cost Reduction to Improve Margins: Management has been consistently making efforts to reduce both construction, and selling, general and administrative (SG&A) expenses. It keeps construction costs under check by designing homes efficiently, and also via obtaining construction materials and labor at competitive prices.
D.R. Horton expects home sales gross margin within 20.5-21% compared with 19.8% in the year-ago quarter. In the fiscal second quarter, the company’s gross margin on home sales expanded 100 basis points year over year to 20.8%.
Meanwhile, it expects SG&A expenses, as a percentage of homebuilding revenues, in the range of 8.2-8.3%. This compares favorably with the year-ago level of 8.4%.
Overall, D.R. Horton remains well poised to gain traction on the current positive housing scenario. For fiscal third quarter, the Zacks Consensus Estimate for earnings is pegged at $1.08 per share, reflecting a solid increase of 42.1% year over year.
What the Zacks Model Says
Our proven model does not show that D.R. Horton is likely to beat estimates in the quarter to be reported. 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.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: D.R. Horton has an Earnings ESP of +1.17%.
Zacks Rank: D.R. Horton currently carries a Zacks Rank #4 (Sell).
We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Stocks to Consider
Here are some companies in the construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported:
GCP Applied Technologies Inc. has an Earnings ESP of +2.56% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company is expected to report quarterly results on Aug 2, 2018.
Foundation Building Materials, Inc. has an Earnings ESP of +21.05% and carries a Zacks Rank #2. The company is expected to report quarterly numbers on Aug 2, 2018.
Louisiana-Pacific Corporation (LPX - Free Report) has an Earnings ESP of +8.62% and sports a Zacks Rank #1. The company is slated to report quarterly numbers on Aug 7, 2018.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>