Shares of D.R. Horton Inc. (DHI - Analyst Report) reached a 52-week high of $27.39 on Monday, May 13, 2013 gaining momentum from solid second-quarter fiscal 2013 results announced on Apr 26. Moreover, this Zacks Rank #1 (Strong Buy) homebuilder has a bright outlook for the rest of the year with the improving housing fundamentals. The closing price of the shares on May 13 was $27.35, yielding a superb year-to-date return of 34.1%.
Share Price Drivers
Estimates have been rising for D.R. Hortonafter it reported strong second-quarter fiscal 2013 results beating the Zacks Consensus Estimate for both revenues and earnings.
D.R. Horton’s adjusted net earnings of 32 cents per share in the second quarter of fiscal 2013 handsomely beat the Zacks Consensus Estimate of 20 cents by 60% and the year-ago earnings of 13 cents by 146.2%. The earnings upsurge was driven by both sales and margin improvement in the homebuilding and financial services segments.
Homebuilding revenues climbed 48.7% year over year driven by better pricing power and volume growth amid improved housing market conditions. Homes sold, closed and in backlog, all increased by greater than 30% in the quarter compared to the year-ago quarter. Margins improved both sequentially and year over year driven by better pricing power and reduced incentives.
In addition to this, management has a bright outlook for the rest of the year and expects profitability to be driven by its solid balance sheet and improved liquidity position allowing it to re-invest in growth opportunities; increased pricing power; and rising homes inventory and improving land position.
The robust quarterly results and a promising outlook for the upcoming quarters led to an upward bias in estimate revisions. In fact, the Zacks Consensus Estimate for 2013 and 2014 increased a respective 18.2% and 16.7% to $1.17 and $1.68 per share over the last 60 days. Moreover, D.R. Horton has beaten the Zacks Consensus Estimate for the past four straight quarters.
Other Stocks to Consider
Other stocks in the homebuilding sector that are performing well and deserve a mention include Ryland Group Inc. and Meritage Homes Corporation (MTH - Snapshot Report), both carrying a Zacks Rank #1 (Strong Buy) and KB Home(KBH - Analyst Report), carrying a Zacks Rank #2 (Buy).