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D.R. Horton, Inc. (DHI - Free Report) is in the midst of an impressive decade-long stretch as the homebuilder capitalizes on various segments of the market around much of the country. DHI and other homebuilders are set to benefit from the continued housing boom, with the market still well short of current demand. And D.R. Horton is coming off solid Q1 FY22 financial results in early February.
The DHI Story
D.R. Horton is one of America’s largest homebuilders with current operations in over 100 markets in 32 states. The company operates a diverse portfolio of brands that includes its namesake, Emerald Homes, and others. The various brands cater to different types of buyers at different stages of life and income brackets.
D.R. Horton breaks down its offering into first-time buyers, quality and value, active adult, and luxury, with its prices ranging, in general, from $150K to over $1 million. On top of that, DHI is in the single and multi-family rental property business. And unlike some other builders, DHI offers through various subsidiaries mortgage financing, title services, and insurance services.
DHI posted 37% revenue growth for the full year ended on September 30 to help lift its adjusted earnings by 78%. Including last year, D.R. Horton has averaged 23% revenue growth over the last 10 years, with its lowest top-line expansion coming in at 10%. Most recently, it posted 19% revenue growth in Q1 FY22 and 48% higher earnings. Last quarter, it closed over 18K homes with the value up 17% to $6.7 billion.
Image Source: Zacks Investment Research
Looking Ahead
D.R. Horton had roughly 55K homes in its inventory at the end of December and it started over 25K homes during Q1 FY22. The housing market remains hot, with existing-home sales up 6.7% in January from the prior month. Most importantly, reports suggest the U.S. housing market is still millions of single-family homes short of current demand. And these trends could continue as millennials drive the market.
Despite rising interest rates, it is worth remembering that even though 30-year mortgage rates are off their lows (around 2.65% in January 2021), they are still around where they were in the front half of 2019 and well beneath the average during most of the last decade at 3.9%.
Zacks estimates call for D.R Horton’s FY22 revenue to climb 26% from $28 billion to $35 billion, with FY23 projected to come in 9% higher at $38 billion. At the bottom end, its adjusted earnings are expected to surge over 38% higher this year and another 5% next year.
Analysts have also raced to up their EPS guidance since D.R. Horton’s quarterly release on February 2, with its FY22 consensus estimate up 9% and FY23 7% stronger. “Housing market conditions remain very robust, and we are still selling homes later in the construction cycle so we can better ensure the certainty of the home close date for our homebuyers,” Chairman Donald R. Horton said in prepared remarks.
“We continue to focus on building the infrastructure and processes to support a higher level of home starts while working to stabilize and then reduce our construction cycle times to historical norms.”
Image Source: Zacks Investment Research
Performance & Valuation
D.R Horton shares have climbed 500% in the past decade to double its industry and the S&P 500. Its outperformance includes a 105% rally in the trailing three years vs. the benchmark’s 60% and its highly-ranked industry’s 65%.
The stock has been up and down in the last 12 months and closed regular hours Friday around $83 per share, or 25% beneath its early December records. Better still, it trades 45% below its current Zacks consensus price target of $120 a share.
On the valuation side of the coin, DHI trades at decade-long lows at 5.2X forward 12-month earnings. This is highly impressive considering its stock price is up 500% during that stretch, including its recent decline. Plus, D.R. Horton trades at a 50% discount to its own five-year median and 67% below its highs.
Image Source: Zacks Investment Research
Bottom Line
D.R Horton’s solid earnings revisions activity helps it land a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grade for Value in our Style Scores system. The company also buys back its own stock and its dividend yield sits at 1.1%. Alongside its individual strengths, DHI is part of the Building Products - Home Builders space that is in the top 6% of over 250 Zacks industries.
Wall Street is high on the stock with 11 of the 15 brokerage recommendations Zacks has at “Strong Buys” and the other four at “Holds.” Despite rising rates and higher prices across the economy, D.R Horton’s outlook is strong and its valuation levels are extremely enticing. And its balance sheet is rather strong.
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Bull of the Day: D.R. Horton, Inc. (DHI)
D.R. Horton, Inc. (DHI - Free Report) is in the midst of an impressive decade-long stretch as the homebuilder capitalizes on various segments of the market around much of the country. DHI and other homebuilders are set to benefit from the continued housing boom, with the market still well short of current demand. And D.R. Horton is coming off solid Q1 FY22 financial results in early February.
The DHI Story
D.R. Horton is one of America’s largest homebuilders with current operations in over 100 markets in 32 states. The company operates a diverse portfolio of brands that includes its namesake, Emerald Homes, and others. The various brands cater to different types of buyers at different stages of life and income brackets.
D.R. Horton breaks down its offering into first-time buyers, quality and value, active adult, and luxury, with its prices ranging, in general, from $150K to over $1 million. On top of that, DHI is in the single and multi-family rental property business. And unlike some other builders, DHI offers through various subsidiaries mortgage financing, title services, and insurance services.
DHI posted 37% revenue growth for the full year ended on September 30 to help lift its adjusted earnings by 78%. Including last year, D.R. Horton has averaged 23% revenue growth over the last 10 years, with its lowest top-line expansion coming in at 10%. Most recently, it posted 19% revenue growth in Q1 FY22 and 48% higher earnings. Last quarter, it closed over 18K homes with the value up 17% to $6.7 billion.
Image Source: Zacks Investment Research
Looking Ahead
D.R. Horton had roughly 55K homes in its inventory at the end of December and it started over 25K homes during Q1 FY22. The housing market remains hot, with existing-home sales up 6.7% in January from the prior month. Most importantly, reports suggest the U.S. housing market is still millions of single-family homes short of current demand. And these trends could continue as millennials drive the market.
Despite rising interest rates, it is worth remembering that even though 30-year mortgage rates are off their lows (around 2.65% in January 2021), they are still around where they were in the front half of 2019 and well beneath the average during most of the last decade at 3.9%.
Zacks estimates call for D.R Horton’s FY22 revenue to climb 26% from $28 billion to $35 billion, with FY23 projected to come in 9% higher at $38 billion. At the bottom end, its adjusted earnings are expected to surge over 38% higher this year and another 5% next year.
Analysts have also raced to up their EPS guidance since D.R. Horton’s quarterly release on February 2, with its FY22 consensus estimate up 9% and FY23 7% stronger. “Housing market conditions remain very robust, and we are still selling homes later in the construction cycle so we can better ensure the certainty of the home close date for our homebuyers,” Chairman Donald R. Horton said in prepared remarks.
“We continue to focus on building the infrastructure and processes to support a higher level of home starts while working to stabilize and then reduce our construction cycle times to historical norms.”
Image Source: Zacks Investment Research
Performance & Valuation
D.R Horton shares have climbed 500% in the past decade to double its industry and the S&P 500. Its outperformance includes a 105% rally in the trailing three years vs. the benchmark’s 60% and its highly-ranked industry’s 65%.
The stock has been up and down in the last 12 months and closed regular hours Friday around $83 per share, or 25% beneath its early December records. Better still, it trades 45% below its current Zacks consensus price target of $120 a share.
On the valuation side of the coin, DHI trades at decade-long lows at 5.2X forward 12-month earnings. This is highly impressive considering its stock price is up 500% during that stretch, including its recent decline. Plus, D.R. Horton trades at a 50% discount to its own five-year median and 67% below its highs.
Image Source: Zacks Investment Research
Bottom Line
D.R Horton’s solid earnings revisions activity helps it land a Zacks Rank #1 (Strong Buy) right now, alongside its “A” grade for Value in our Style Scores system. The company also buys back its own stock and its dividend yield sits at 1.1%. Alongside its individual strengths, DHI is part of the Building Products - Home Builders space that is in the top 6% of over 250 Zacks industries.
Wall Street is high on the stock with 11 of the 15 brokerage recommendations Zacks has at “Strong Buys” and the other four at “Holds.” Despite rising rates and higher prices across the economy, D.R Horton’s outlook is strong and its valuation levels are extremely enticing. And its balance sheet is rather strong.