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In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 21.6% and 11.6%, respectively. Yet, earnings of this homebuilding company declined 13%, but revenues grew 2.9% from the year-ago reported figures.
Markedly, D.R. Horton reported better-than-expected earnings in 15 of the last 16 quarters.
The Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $1.90 per share over the past 60 days. This indicates a 52.9% decrease from the year-ago earnings of $4.03 per share. The consensus mark for revenues is $6.6 billion, suggesting an 18% year-over-year decline.
D.R. Horton’s Homebuilding revenues are expected to have declined in the fiscal second quarter from the year-ago level due to soft housing demand and prevailing industry headwinds. The U.S. housing market has been grappling with uncertainties arising from high mortgage rates. This may have impacted DHI’s revenues and orders in the to-be-reported quarter. However, the company’s industry-leading market share, broad geographic footprint and affordable product offerings across multiple brands may have somewhat aided the top line.
DHI anticipates total revenues of $6.3-$6.7 billion for the quarter (compared with $8 billion a year ago). Homes closed are anticipated within 16,000-17,000 units.
We expect Homebuilding revenues to decline 17.6% year over year to $6.19 billion in the quarter. The average selling price of homes closed is expected to be up 0.2% to $379,100.
We expect Financial Services revenues of $153.4 million, which suggests a fall of 30.9% from the year-ago level of $222.1 million.
Also, higher land, labor and material costs are expected to reflect on fiscal second-quarter margins to some extent. The company has been witnessing significant supply-chain disruptions, including shortages and delayed delivery of certain building materials and a tight labor market. These are likely to have created difficulties for DHI in fulfilling customer demand, thereby affecting deliveries.
Other Projections
DHI expects the home sales gross margin for the fiscal second quarter to be within the 20-21% range, reflecting a decrease from 28.9% a year ago. DHI expects homebuilding SG&A, as a percentage of revenues, to be between 8% and 8.3% (versus 6.8% reported a year ago). Financial services pretax profit margin is likely to be around 20%, and the income tax rate is expected to be approximately 23.5% to 24% in the quarter.
The consensus estimate for net sales orders is currently pegged at 19,457 units. This suggests a decrease from 24,340 units a year ago. The same for backlog is currently pegged at 18,709 units, which suggests a decrease from 33,859 units a year ago. The consensus estimate for the value of the backlog is $7.06 billion, implying a significant decline from $13.31 billion in the corresponding fiscal 2022 quarter.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for D.R. Horton for the quarter to be reported. That 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. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: DHI has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #3.
Stocks With Favorable Combinations
Here are some companies in the Zacks 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.
EMCOR Group (EME - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank #2.
EME’s earnings missed the consensus mark once but beat the same on three other occasions, the average surprise being 5.5%. Earnings for the to-be-reported quarter are expected to increase 32.4% year over year.
WSO’s earnings topped the consensus mark in two of the last four quarters and missed on other two occasions, the average being 15.1%. Earnings for the to-be-reported quarter are expected to decrease 21.4% year over year.
United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +4.51% and a Zacks Rank #3.
URI’s earnings topped the consensus mark in all the last four quarters, the average being 6.9%. Earnings for the to-be-reported quarter are expected to grow 41.7% year over year.
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What to Expect From D.R. Horton's (DHI) Q2 Earnings Release?
D.R. Horton Inc. (DHI - Free Report) is slated to report second-quarter fiscal 2023 (ended Mar 31, 2023) results on Apr 20, before the opening bell.
In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 21.6% and 11.6%, respectively. Yet, earnings of this homebuilding company declined 13%, but revenues grew 2.9% from the year-ago reported figures.
Markedly, D.R. Horton reported better-than-expected earnings in 15 of the last 16 quarters.
The Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has remained unchanged at $1.90 per share over the past 60 days. This indicates a 52.9% decrease from the year-ago earnings of $4.03 per share. The consensus mark for revenues is $6.6 billion, suggesting an 18% year-over-year decline.
D.R. Horton, Inc. Price and EPS Surprise
D.R. Horton, Inc. price-eps-surprise | D.R. Horton, Inc. Quote
Factors to Note
D.R. Horton’s Homebuilding revenues are expected to have declined in the fiscal second quarter from the year-ago level due to soft housing demand and prevailing industry headwinds. The U.S. housing market has been grappling with uncertainties arising from high mortgage rates. This may have impacted DHI’s revenues and orders in the to-be-reported quarter. However, the company’s industry-leading market share, broad geographic footprint and affordable product offerings across multiple brands may have somewhat aided the top line.
DHI anticipates total revenues of $6.3-$6.7 billion for the quarter (compared with $8 billion a year ago). Homes closed are anticipated within 16,000-17,000 units.
We expect Homebuilding revenues to decline 17.6% year over year to $6.19 billion in the quarter. The average selling price of homes closed is expected to be up 0.2% to $379,100.
We expect Financial Services revenues of $153.4 million, which suggests a fall of 30.9% from the year-ago level of $222.1 million.
Also, higher land, labor and material costs are expected to reflect on fiscal second-quarter margins to some extent. The company has been witnessing significant supply-chain disruptions, including shortages and delayed delivery of certain building materials and a tight labor market. These are likely to have created difficulties for DHI in fulfilling customer demand, thereby affecting deliveries.
Other Projections
DHI expects the home sales gross margin for the fiscal second quarter to be within the 20-21% range, reflecting a decrease from 28.9% a year ago. DHI expects homebuilding SG&A, as a percentage of revenues, to be between 8% and 8.3% (versus 6.8% reported a year ago). Financial services pretax profit margin is likely to be around 20%, and the income tax rate is expected to be approximately 23.5% to 24% in the quarter.
The consensus estimate for net sales orders is currently pegged at 19,457 units. This suggests a decrease from 24,340 units a year ago. The same for backlog is currently pegged at 18,709 units, which suggests a decrease from 33,859 units a year ago. The consensus estimate for the value of the backlog is $7.06 billion, implying a significant decline from $13.31 billion in the corresponding fiscal 2022 quarter.
What the Zacks Model Unveils
Our proven model does not conclusively predict an earnings beat for D.R. Horton for the quarter to be reported. That 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. Unfortunately, that is not the case here, as you will see below.
Earnings ESP: DHI has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: It currently carries a Zacks Rank #3.
Stocks With Favorable Combinations
Here are some companies in the Zacks 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.
EMCOR Group (EME - Free Report) has an Earnings ESP of +0.27% and a Zacks Rank #2.
EME’s earnings missed the consensus mark once but beat the same on three other occasions, the average surprise being 5.5%. Earnings for the to-be-reported quarter are expected to increase 32.4% year over year.
Watsco, Inc. (WSO - Free Report) has an Earnings ESP of +4.12% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
WSO’s earnings topped the consensus mark in two of the last four quarters and missed on other two occasions, the average being 15.1%. Earnings for the to-be-reported quarter are expected to decrease 21.4% year over year.
United Rentals, Inc. (URI - Free Report) has an Earnings ESP of +4.51% and a Zacks Rank #3.
URI’s earnings topped the consensus mark in all the last four quarters, the average being 6.9%. Earnings for the to-be-reported quarter are expected to grow 41.7% year over year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.