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D.R. Horton (DHI) Up 2.4% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for D.R. Horton (DHI - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is D.R. Horton due for a pullback? 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 drivers.
D.R. Horton, Inc.’s fourth-quarter fiscal 2022 earnings and revenues missed the respective Zacks Consensus Estimate.
Nonetheless, D.R. Horton’s fiscal 2022 results were highlighted by 42% improvement in pre-tax income, 350 basis point (bps) expansion in pre-tax profit margin and 21% increase in revenues. These results reflect production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.
Donald R. Horton, the chairman of the board, said, "We are well-positioned to navigate changing market conditions and are focused on turning our inventory to maximize returns and capital efficiency in each of our communities. Our homebuilding cash flow from operations in fiscal 2022 was $1.9 billion, and our homebuilding leverage at the end of the year was 13.2%, the lowest in Company history. Our strong balance sheet, liquidity and low leverage provide us with significant financial flexibility, and we plan to maintain our disciplined approach to investing capital to enhance the long-term value of our company, including returning capital to our shareholders through both dividends and share repurchases on a consistent basis.”
Earnings & Revenue Discussion
DHI reported adjusted earnings of $4.67 per share for the reported quarter, missing the Zacks Consensus Estimate of $5.06 by 7.7% but increasing 26% from the year-ago period.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $9.64 billion, up 19% year over year. The reported figure, however, missed the consensus mark of $10.04 billion.
Segment Details
Homebuilding revenues of $9.39 billion increased 23.1% from the prior-year quarter. The upside was led by higher pricing and deliveries.
Home closings were up 5.8% from the prior-year quarter to 23,212 homes, and homes closed increased 23.4 % in value to $9.37 billion.
Net sales orders were down 14.8% year over year to 13,582 homes. The value of net orders declined 10.1% year over year to $5.43 billion. The cancelation rate was 32%, up from 19% a year ago.
Order backlog of homes at the end of fiscal 2022 was 19,614 homes, down 25% year over year. Moreover, the value of the backlog was down 16% from the prior year to $8 billion.
Financial Services’ revenues decreased 39.7% from the year-ago level to $134.2 million.
Forestar contributed $381.4 million to total quarterly revenues, reflecting a decline from $418.7 million a year ago.
The Rental business generated revenues of $21.1 million for the quarter compared with $212.9 million a year ago.
Margins
Consolidated pre-tax margin expanded to 21.4% for the quarter from 21.3% a year ago.
Fiscal 2022 Highlights
Earnings came in at $16.51 per share, reflecting a 45% jump from a year ago. Total revenues were $33.5 billion, up 21% from fiscal 2021. Deliveries were up 1% in units and 20.2% in value. Pre-tax margin expanded 350 bps to 22.8%.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $2.57 billion as of Sep 30, 2022, compared with $3.24 billion at the fiscal 2021-end. It had $2 billion of available capacity on the revolving credit facility at the end of fiscal 2022. Total homebuilding liquidity was $4 billion.
At the end of fiscal 2022, DHI had 46,400 homes in inventory, of which 27,200 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 573,200 lots at the fiscal 2022-end. Of these, 23% were owned and 77% were controlled through land and lot purchase contracts.
At the end of September, homebuilding debt totaled $2.9 billion, with homebuilding debt to total capital of 13.2%. The trailing 12-month return on equity was 34.5%.
D.R. Horton repurchased 3.6 million shares of common stock for $251.7 million during the fiscal fourth quarter and 14 million shares for $1.1 billion during fiscal 2022. The company’s remaining stock repurchase authorization as of Sep 30, 2022, totaled $438.3 million. The company also paid dividends of $78.2 million during the quarter and $316.5 million during fiscal 2022.
Fiscal Q1 2023 Guidance
Total revenues are now expected in the range of $6-$6.8 billion. Homes closed are anticipated within 15,000-16,500 units. Home sales gross margin is expected within 23-24%. Homebuilding SG&A, as a percentage of revenues, is expected to be 8% to 8.4%. Financial services pretax profit margin will likely be around 20%, and the income tax rate to be approximately 23% in the quarter. Home orders are expected to decline 25-30% in the quarter.
Fiscal 2023 Views
The average closing price and gross margin are expected to be lower from the year-ago period. SG&A, as a percentage of sales, is expected to be higher year over year. The financial services margin should be higher than the fourth quarter of fiscal 2022 mark but lower than fiscal 2022. Rental segment revenues and profits are likely to be higher year over year. Consolidated sales are expected to be up year over year. The income tax rate is expected to be approximately 23%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -15.05% due to these changes.
VGM Scores
At this time, D.R. Horton has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise D.R. Horton has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
D.R. Horton belongs to the Zacks Building Products - Home Builders industry. Another stock from the same industry, M.D.C. Holdings, Inc. , has gained 1.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
M.D.C. Holdings, Inc. reported revenues of $1.44 billion in the last reported quarter, representing a year-over-year change of +10.8%. EPS of $1.98 for the same period compares with $1.99 a year ago.
M.D.C. Holdings, Inc. is expected to post earnings of $1.53 per share for the current quarter, representing a year-over-year change of -30.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -6.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for M.D.C. Holdings, Inc. Also, the stock has a VGM Score of A.
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D.R. Horton (DHI) Up 2.4% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for D.R. Horton (DHI - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is D.R. Horton due for a pullback? 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 drivers.
D.R. Horton (DHI - Free Report) Q4 Earnings & Revenues Miss
D.R. Horton, Inc.’s fourth-quarter fiscal 2022 earnings and revenues missed the respective Zacks Consensus Estimate.
Nonetheless, D.R. Horton’s fiscal 2022 results were highlighted by 42% improvement in pre-tax income, 350 basis point (bps) expansion in pre-tax profit margin and 21% increase in revenues. These results reflect production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.
Donald R. Horton, the chairman of the board, said, "We are well-positioned to navigate changing market conditions and are focused on turning our inventory to maximize returns and capital efficiency in each of our communities. Our homebuilding cash flow from operations in fiscal 2022 was $1.9 billion, and our homebuilding leverage at the end of the year was 13.2%, the lowest in Company history. Our strong balance sheet, liquidity and low leverage provide us with significant financial flexibility, and we plan to maintain our disciplined approach to investing capital to enhance the long-term value of our company, including returning capital to our shareholders through both dividends and share repurchases on a consistent basis.”
Earnings & Revenue Discussion
DHI reported adjusted earnings of $4.67 per share for the reported quarter, missing the Zacks Consensus Estimate of $5.06 by 7.7% but increasing 26% from the year-ago period.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $9.64 billion, up 19% year over year. The reported figure, however, missed the consensus mark of $10.04 billion.
Segment Details
Homebuilding revenues of $9.39 billion increased 23.1% from the prior-year quarter. The upside was led by higher pricing and deliveries.
Home closings were up 5.8% from the prior-year quarter to 23,212 homes, and homes closed increased 23.4 % in value to $9.37 billion.
Net sales orders were down 14.8% year over year to 13,582 homes. The value of net orders declined 10.1% year over year to $5.43 billion. The cancelation rate was 32%, up from 19% a year ago.
Order backlog of homes at the end of fiscal 2022 was 19,614 homes, down 25% year over year. Moreover, the value of the backlog was down 16% from the prior year to $8 billion.
Financial Services’ revenues decreased 39.7% from the year-ago level to $134.2 million.
Forestar contributed $381.4 million to total quarterly revenues, reflecting a decline from $418.7 million a year ago.
The Rental business generated revenues of $21.1 million for the quarter compared with $212.9 million a year ago.
Margins
Consolidated pre-tax margin expanded to 21.4% for the quarter from 21.3% a year ago.
Fiscal 2022 Highlights
Earnings came in at $16.51 per share, reflecting a 45% jump from a year ago. Total revenues were $33.5 billion, up 21% from fiscal 2021. Deliveries were up 1% in units and 20.2% in value. Pre-tax margin expanded 350 bps to 22.8%.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $2.57 billion as of Sep 30, 2022, compared with $3.24 billion at the fiscal 2021-end. It had $2 billion of available capacity on the revolving credit facility at the end of fiscal 2022. Total homebuilding liquidity was $4 billion.
At the end of fiscal 2022, DHI had 46,400 homes in inventory, of which 27,200 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 573,200 lots at the fiscal 2022-end. Of these, 23% were owned and 77% were controlled through land and lot purchase contracts.
At the end of September, homebuilding debt totaled $2.9 billion, with homebuilding debt to total capital of 13.2%. The trailing 12-month return on equity was 34.5%.
D.R. Horton repurchased 3.6 million shares of common stock for $251.7 million during the fiscal fourth quarter and 14 million shares for $1.1 billion during fiscal 2022. The company’s remaining stock repurchase authorization as of Sep 30, 2022, totaled $438.3 million. The company also paid dividends of $78.2 million during the quarter and $316.5 million during fiscal 2022.
Fiscal Q1 2023 Guidance
Total revenues are now expected in the range of $6-$6.8 billion. Homes closed are anticipated within 15,000-16,500 units. Home sales gross margin is expected within 23-24%. Homebuilding SG&A, as a percentage of revenues, is expected to be 8% to 8.4%. Financial services pretax profit margin will likely be around 20%, and the income tax rate to be approximately 23% in the quarter. Home orders are expected to decline 25-30% in the quarter.
Fiscal 2023 Views
The average closing price and gross margin are expected to be lower from the year-ago period. SG&A, as a percentage of sales, is expected to be higher year over year. The financial services margin should be higher than the fourth quarter of fiscal 2022 mark but lower than fiscal 2022. Rental segment revenues and profits are likely to be higher year over year. Consolidated sales are expected to be up year over year. The income tax rate is expected to be approximately 23%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -15.05% due to these changes.
VGM Scores
At this time, D.R. Horton has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise D.R. Horton has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
D.R. Horton belongs to the Zacks Building Products - Home Builders industry. Another stock from the same industry, M.D.C. Holdings, Inc. , has gained 1.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
M.D.C. Holdings, Inc. reported revenues of $1.44 billion in the last reported quarter, representing a year-over-year change of +10.8%. EPS of $1.98 for the same period compares with $1.99 a year ago.
M.D.C. Holdings, Inc. is expected to post earnings of $1.53 per share for the current quarter, representing a year-over-year change of -30.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -6.2%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #5 (Strong Sell) for M.D.C. Holdings, Inc. Also, the stock has a VGM Score of A.