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In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 38.3% and 16.4%, respectively. Yet, earnings of this homebuilding company declined 16.5%, but revenues were up 11% from the year-ago reported figures.
Markedly, D.R. Horton reported better-than-expected earnings in 17 of the last 18 quarters.
The Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has remained unchanged at $3.98 over the past 60 days. The estimated figure indicates a 14.8% decrease from the year-ago EPS of $4.67. The consensus mark for revenues is $10.07 billion, suggesting 4.5% year-over-year growth.
D.R. Horton’s Homebuilding revenues are expected to have improved in the fiscal fourth quarter from the year-ago level owing to higher homes closed. Although the company’s home sales are expected to have witnessed tough year-over-year comparisons, DHI will likely generate sequentially higher sales, given a lack of existing homes for sale. Also, the company’s industry-leading market share, acquisitions, broad geographic footprint and affordable product offerings across multiple brands might have somewhat aided the top line.
DHI anticipates total revenues of $9.7-$10.1 billion for the quarter (compared with $9.6 billion a year ago). Homes closed are anticipated within 22,800-23,300 units.
Our model predicts Homebuilding revenues to decline 6.4% year over year to $8.78 billion in the quarter. However, the metric is expected to have improved from $8.73 billion reported in the prior quarter. The average selling price of homes closed is expected to be down 6.7% year over year to $376,800 in the fiscal fourth quarter. Homes closed are expected to be 23,233 units, up 0.1% year over year and 1.1% sequentially.
We expect Financial Services revenues of $256.8 million, which suggests growth of 91.4% from the year-ago level of $134.2 million.
Other Projections
Meanwhile, higher land, labor and material costs are expected to have reflected in the fiscal fourth-quarter margins. The tight labor market is a concern. DHI expects the home sales gross margin for the fiscal fourth quarter to be in the range of 23.5-24%, reflecting a decrease from 28.3% a year ago. The company expects homebuilding gross margins to be slightly higher in the fiscal fourth quarter compared with the prior quarter.
DHI expects homebuilding SG&A, as a percentage of revenues, to be between 6.7% and 6.8% (versus 6.7% reported a year ago). Financial Services pretax profit margin is likely to be in the range of 30-35%, and the income tax rate is expected to be 24.5% in the quarter. We expect homebuilding SG&A to be 6.7% of homebuilding revenues and Financial Services pretax profit margin to be 34.5% for the quarter.
Our model predicts net sales orders to increase 44.9% year over year to 19,676 units. The same for backlog is currently pegged at 15,629 units, which suggests a decrease from 19,614 units reported a year ago. Our model predicts the value of the backlog to be $6.07 billion, implying a decline from $7.98 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, this 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: D.R. Horton 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 on their respective quarters to be reported.
ROAD’s earnings topped the consensus mark in three of the last four quarters, with the average being 10.6%. Earnings for the to-be-reported quarter are expected to rise 108% year over year.
Latham Group, Inc. (SWIM - Free Report) has an Earnings ESP of +13.52% and carries a Zacks Rank #3.
SWIM’s earnings missed the consensus mark in all of the last four quarters, the average negative surprise being 100.6%. Earnings for the to-be-reported quarter are expected to grow 20% year over year.
Peer Release
Meritage Homes Corporation (MTH - Free Report) reported better-than-expected results for third-quarter 2023. Both earnings and total closing revenues surpassed the Zacks Consensus Estimate.
MTH management recorded 96% backlog conversion as well as the highest third quarter of home closings and home closing revenues during the quarter on improved cycle time and its spec-building strategy.
Image: Bigstock
D.R. Horton (DHI) to Report Q4 Earnings: What to Expect?
D.R. Horton Inc. (DHI - Free Report) is slated to report fourth-quarter fiscal 2023 (ended Sep 30, 2023) results on Nov 7, before the opening bell.
In the last reported quarter, the company’s earnings and revenues surpassed the Zacks Consensus Estimate by 38.3% and 16.4%, respectively. Yet, earnings of this homebuilding company declined 16.5%, but revenues were up 11% from the year-ago reported figures.
Markedly, D.R. Horton reported better-than-expected earnings in 17 of the last 18 quarters.
The Trend in Estimate Revision
The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has remained unchanged at $3.98 over the past 60 days. The estimated figure indicates a 14.8% decrease from the year-ago EPS of $4.67. The consensus mark for revenues is $10.07 billion, suggesting 4.5% year-over-year growth.
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 improved in the fiscal fourth quarter from the year-ago level owing to higher homes closed. Although the company’s home sales are expected to have witnessed tough year-over-year comparisons, DHI will likely generate sequentially higher sales, given a lack of existing homes for sale. Also, the company’s industry-leading market share, acquisitions, broad geographic footprint and affordable product offerings across multiple brands might have somewhat aided the top line.
DHI anticipates total revenues of $9.7-$10.1 billion for the quarter (compared with $9.6 billion a year ago). Homes closed are anticipated within 22,800-23,300 units.
Our model predicts Homebuilding revenues to decline 6.4% year over year to $8.78 billion in the quarter. However, the metric is expected to have improved from $8.73 billion reported in the prior quarter. The average selling price of homes closed is expected to be down 6.7% year over year to $376,800 in the fiscal fourth quarter. Homes closed are expected to be 23,233 units, up 0.1% year over year and 1.1% sequentially.
We expect Financial Services revenues of $256.8 million, which suggests growth of 91.4% from the year-ago level of $134.2 million.
Other Projections
Meanwhile, higher land, labor and material costs are expected to have reflected in the fiscal fourth-quarter margins. The tight labor market is a concern. DHI expects the home sales gross margin for the fiscal fourth quarter to be in the range of 23.5-24%, reflecting a decrease from 28.3% a year ago. The company expects homebuilding gross margins to be slightly higher in the fiscal fourth quarter compared with the prior quarter.
DHI expects homebuilding SG&A, as a percentage of revenues, to be between 6.7% and 6.8% (versus 6.7% reported a year ago). Financial Services pretax profit margin is likely to be in the range of 30-35%, and the income tax rate is expected to be 24.5% in the quarter. We expect homebuilding SG&A to be 6.7% of homebuilding revenues and Financial Services pretax profit margin to be 34.5% for the quarter.
Our model predicts net sales orders to increase 44.9% year over year to 19,676 units. The same for backlog is currently pegged at 15,629 units, which suggests a decrease from 19,614 units reported a year ago. Our model predicts the value of the backlog to be $6.07 billion, implying a decline from $7.98 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, this 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: D.R. Horton 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 on their respective quarters to be reported.
Construction Partners, Inc. (ROAD - Free Report) has an Earnings ESP of +2.91% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
ROAD’s earnings topped the consensus mark in three of the last four quarters, with the average being 10.6%. Earnings for the to-be-reported quarter are expected to rise 108% year over year.
Latham Group, Inc. (SWIM - Free Report) has an Earnings ESP of +13.52% and carries a Zacks Rank #3.
SWIM’s earnings missed the consensus mark in all of the last four quarters, the average negative surprise being 100.6%. Earnings for the to-be-reported quarter are expected to grow 20% year over year.
Peer Release
Meritage Homes Corporation (MTH - Free Report) reported better-than-expected results for third-quarter 2023. Both earnings and total closing revenues surpassed the Zacks Consensus Estimate.
MTH management recorded 96% backlog conversion as well as the highest third quarter of home closings and home closing revenues during the quarter on improved cycle time and its spec-building strategy.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.