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Here's Why Investors Should Buy D.R. Horton (DHI) Stock Now
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Despite numerous headwinds looming on the U.S. homebuilding market, a lack of existing inventory is fueling demand for new construction. Among the industry bellwethers, D.R. Horton, Inc. (DHI - Free Report) has been reaping the benefits of the above-mentioned tailwind along with its solid acquisition strategies, increased homebuilding lots, decreasing cycle times and diverse product offerings across multiple brands and price points.
Shares of this Arlington, TX-based homebuilder have gained 55.6% over the past year, in-line with the Zacks Building Products - Home Builders industry’s 55.6% rise. This Zacks Rank #2 (Buy) stock has a long-term earnings growth rate of 18.5%, which highlights its inherent strength.
The Zacks Consensus Estimate has witnessed an uptrend over the past 30 days as analysts raised their estimates. Over the said time frame, the Zacks Consensus Estimate for fiscal 2023 and 2024 earnings of $12.15 per share and $12.81 per share has increased 8.8% and 9.4%, respectively.
Image Source: Zacks Investment Research
What Makes the Stock an Attractive Pick?
Improving Builders’ Sentiment: Builders are now cautiously optimistic for 2023 as a lack of existing inventory is shifting demand to the new home market. Although builders continue to grapple with high construction costs and material supply-chain disruptions, they continue to witness strong pent-up demand as buyers wait for interest rates to drop and turn more to the new home market due to a shortage of existing inventory.
In July, the National Association of Home Builders/Wells Fargo Housing Market Index revealed that builder confidence in the market for newly constructed single-family homes experienced a one-point rise, reaching a score of 56. This marks the seventh consecutive month of growth in builder confidence and signifies the highest level recorded since June of the previous year.
On the third quarter of fiscal 2023 earnings call, D.R. Horton highlighted that the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. This tailwind has helped this homebuilder to witness net sales order growth of 37% year over year in the fiscal third quarter.
Accretive Acquisitions & Higher Land Investment: Acquisitions have been an important part of D.R. Horton’s growth strategy. The company is fast acquiring homebuilding companies in desirable markets. In June 2023, the company acquired the homebuilding operations of Truland Homes, which operates in Baldwin County, Alabama and Northwest Florida, for approximately $100 million in cash. The acquired assets include nearly about 155 homes in inventory, 620 lots and a sales order backlog of 55 homes, along with approximately 660 additional lots through land purchase contracts.
In the fiscal third quarter of 2023, the company’s homebuilding investments in lots, land and development for the quarter add up to $2.2 billion, up 25% year over year and 27% sequentially. D.R. Horton’s well-stocked supply of land, plots and homes provide it with a strong competitive position to meet the demand in future quarters, thereby growing sales and home closings.
Focus on Higher Returns: The company strategically manages the pricing, incentives and sales pace across its markets to optimize the returns on inventory investments. DHI’s ROE was 24.3% for the trailing 12-month period that ended Jun 30, 2023, and homebuilding ROI was 31.8% for the same period.
Affordable Homes: The company’s strategic shift toward more entry-level affordable homes has been paying off, with the segment experiencing strong demand and limited supply. First-time homebuyers represented 56% of its closings in third-quarter fiscal 2023. For fourth-quarter fiscal 2023 and the full fiscal year, our model predicts net sales orders to grow 44.9% to 19,676 units and 3.9% to 79,079 units, respectively, year over year.
Other Key Picks
Some other top-ranked stocks in the same space are:
Based in Los Angeles, CA, KB Home (KBH - Free Report) has been gaining from prudent growth plans, a solid existing geographic footprint and a built-to-order approach.
KBH currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2023 and 2024 earnings of $6.29 per share and $6.85 per share has increased 2.3% and 1.9%, respectively, over the past 30 days. Shares of the company have gained 59.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beazer Homes USA (BZH - Free Report) designs, builds and sells single-family homes. Shares of the company have gained 99.1% in the past year.
BZH currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 and 2024 have increased to $4.75 per share and $5.21 per share from $3.95 and $4.46, respectively, over the past 30 days.
Taylor Morrison Home Corporation’s (TMHC - Free Report) ongoing operational enhancements, acquisition synergies and robust pricing power have more than offset the inflationary pressure and delays in some closings.
TMHC currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its 2023 and 2024 earnings has been upwardly revised to $7.05 per share and $7.44 per share from $6.81 and $6.89, respectively, over the past 30 days. Shares of the company have gained 69.1% in the past year.
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Here's Why Investors Should Buy D.R. Horton (DHI) Stock Now
Despite numerous headwinds looming on the U.S. homebuilding market, a lack of existing inventory is fueling demand for new construction. Among the industry bellwethers, D.R. Horton, Inc. (DHI - Free Report) has been reaping the benefits of the above-mentioned tailwind along with its solid acquisition strategies, increased homebuilding lots, decreasing cycle times and diverse product offerings across multiple brands and price points.
Shares of this Arlington, TX-based homebuilder have gained 55.6% over the past year, in-line with the Zacks Building Products - Home Builders industry’s 55.6% rise. This Zacks Rank #2 (Buy) stock has a long-term earnings growth rate of 18.5%, which highlights its inherent strength.
The Zacks Consensus Estimate has witnessed an uptrend over the past 30 days as analysts raised their estimates. Over the said time frame, the Zacks Consensus Estimate for fiscal 2023 and 2024 earnings of $12.15 per share and $12.81 per share has increased 8.8% and 9.4%, respectively.
Image Source: Zacks Investment Research
What Makes the Stock an Attractive Pick?
Improving Builders’ Sentiment: Builders are now cautiously optimistic for 2023 as a lack of existing inventory is shifting demand to the new home market. Although builders continue to grapple with high construction costs and material supply-chain disruptions, they continue to witness strong pent-up demand as buyers wait for interest rates to drop and turn more to the new home market due to a shortage of existing inventory.
In July, the National Association of Home Builders/Wells Fargo Housing Market Index revealed that builder confidence in the market for newly constructed single-family homes experienced a one-point rise, reaching a score of 56. This marks the seventh consecutive month of growth in builder confidence and signifies the highest level recorded since June of the previous year.
On the third quarter of fiscal 2023 earnings call, D.R. Horton highlighted that the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable. This tailwind has helped this homebuilder to witness net sales order growth of 37% year over year in the fiscal third quarter.
Accretive Acquisitions & Higher Land Investment: Acquisitions have been an important part of D.R. Horton’s growth strategy. The company is fast acquiring homebuilding companies in desirable markets. In June 2023, the company acquired the homebuilding operations of Truland Homes, which operates in Baldwin County, Alabama and Northwest Florida, for approximately $100 million in cash. The acquired assets include nearly about 155 homes in inventory, 620 lots and a sales order backlog of 55 homes, along with approximately 660 additional lots through land purchase contracts.
In the fiscal third quarter of 2023, the company’s homebuilding investments in lots, land and development for the quarter add up to $2.2 billion, up 25% year over year and 27% sequentially. D.R. Horton’s well-stocked supply of land, plots and homes provide it with a strong competitive position to meet the demand in future quarters, thereby growing sales and home closings.
Focus on Higher Returns: The company strategically manages the pricing, incentives and sales pace across its markets to optimize the returns on inventory investments. DHI’s ROE was 24.3% for the trailing 12-month period that ended Jun 30, 2023, and homebuilding ROI was 31.8% for the same period.
Affordable Homes: The company’s strategic shift toward more entry-level affordable homes has been paying off, with the segment experiencing strong demand and limited supply. First-time homebuyers represented 56% of its closings in third-quarter fiscal 2023. For fourth-quarter fiscal 2023 and the full fiscal year, our model predicts net sales orders to grow 44.9% to 19,676 units and 3.9% to 79,079 units, respectively, year over year.
Other Key Picks
Some other top-ranked stocks in the same space are:
Based in Los Angeles, CA, KB Home (KBH - Free Report) has been gaining from prudent growth plans, a solid existing geographic footprint and a built-to-order approach.
KBH currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2023 and 2024 earnings of $6.29 per share and $6.85 per share has increased 2.3% and 1.9%, respectively, over the past 30 days. Shares of the company have gained 59.2% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Beazer Homes USA (BZH - Free Report) designs, builds and sells single-family homes. Shares of the company have gained 99.1% in the past year.
BZH currently sports a Zacks Rank #1. Earnings estimates for fiscal 2023 and 2024 have increased to $4.75 per share and $5.21 per share from $3.95 and $4.46, respectively, over the past 30 days.
Taylor Morrison Home Corporation’s (TMHC - Free Report) ongoing operational enhancements, acquisition synergies and robust pricing power have more than offset the inflationary pressure and delays in some closings.
TMHC currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its 2023 and 2024 earnings has been upwardly revised to $7.05 per share and $7.44 per share from $6.81 and $6.89, respectively, over the past 30 days. Shares of the company have gained 69.1% in the past year.