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D.R. Horton (DHI) Hits 52-Week High: What's Aiding the Stock?
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D.R. Horton, Inc. (DHI - Free Report) reached a new 52-week high of $156.77 on Jan 10. The stock pulled back to end the trading session at $154.52, up 1.82% from the previous day’s closing price of $151.76.
In the current housing market scenario, improving mortgage rates, pent-up demand and low existing house inventory are benefiting homebuilding and related companies like D.R. Horton. The benefit is reflected in increasing housing starts and sales volumes. As of Jan 4, 2024, according to Freddie Mac, the average 30-year, fixed-rate mortgage is 6.62%, up from 6.61% on Dec 28, 2023, but down from 6.67% on Dec 21, 2023. Although the rates remain elevated (6.48% on Jan 5, 2023) on a year-over-year basis, the Fed’s recent decision to keep the interest rate benchmark between 5.25% and 5.5% along with indication about possible rate cuts in 2024 are expected to push the mortgage rates down further.
Apart from macro tailwinds, the company is also benefiting from accretive acquisitions, land investments and home affordability initiatives.
Price Performance
This Zacks Rank #3 (Hold) company’s shares have gained 51% in the past three months, outperforming the Zacks Building Products - Home Builders industry’s 41.1% growth, the Zacks Construction sector’s 22.2% increase and the S&P 500 Index’s 9.5% rise.
Image Source: Zacks Investment Research
The company’s earnings estimate for fiscal 2024 has moved north to $14.15 per share from $14.14 per share in the past seven days. The stock portrays a positive trend, indicating robust fundamentals and elevating the expectation of outperformance in the near term, despite an uncertain housing market scenario.
Driving Factors
Favorable Macro Scenario: D.R. Horton seems to be benefiting from the current housing market scenario, wherein the existing homes inventory is low and mortgage rates are sequentially improving but remain elevated year over year. The Fed’s announcement of stabilizing the interest rate range between 5.25% and 5.5% induced optimism throughout the housing market, thus aiding homebuilding and related companies. Morever, the decision of the Fed to cut rates in 2024 is the cherry on the cake, given the improving scenario, as it will help reduce mortgage rates and increase affordability.
Strategic Investments: D.R. Horton indulges in strategic investments that aid its growth prospects. The investments are evident in its accretive acquisitions and land purchases. As acquisitions are an important part of the company’s growth strategy, it is fast acquiring homebuilding companies in desirable markets.
The acquisition of the homebuilding operations of Truland Homes, in July 2023, added 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. Furthermore, in fiscal 2023, the company’s homebuilding investments in lots, land and development for the quarter add up to $8 billion, up 6% year over year. DHI’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.
Home Affordability: D.R. Horton is witnessing growth during the uncertain economic scenario from its strategic shift toward more entry-level affordable homes. The current scenario showcases high demand and low sales of existing homes, which are benefiting this homebuilding company. First-time homebuyers represented 55% of its closings in fourth-quarter fiscal 2023.
To counter the adverse impacts of the current market uncertainties to some extent, the company has increased its use of incentives and is focusing on reducing the size of its homes, under possible scenarios, to improve house affordability. It anticipates to continue with this strategy through fiscal 2024 as well.
Key Picks
Here are some better-ranked stocks from the same sector.
MLM delivered a trailing four-quarter earnings surprise of 37.3%, on average. The stock has gained 42.2% in the past year. The Zacks Consensus Estimate for MLM’s 2024 sales and earnings per share (EPS) indicates growth of 9.2% and 13.8%, respectively, from a year ago.
Armstrong World Industries, Inc. (AWI - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 7.9%, on average. Shares of AWI have increased 35.4% in the past year.
The Zacks Consensus Estimate for AWI’s 2024 sales and EPS indicates a rise of 1.3% and 6.8%, respectively, from the prior-year levels.
Taylor Morrison Home Corporation (TMHC - Free Report) currently sports a Zacks Rank of 1. TMHC delivered a trailing four-quarter earnings surprise of 17.5%, on average. The stock has gained 57.4% in the past year.
The Zacks Consensus Estimate for TMHC’s 2024 sales indicates an improvement of 0.8% while the same for EPS indicates a decline of 6.6%, respectively, from a year ago.
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D.R. Horton (DHI) Hits 52-Week High: What's Aiding the Stock?
D.R. Horton, Inc. (DHI - Free Report) reached a new 52-week high of $156.77 on Jan 10. The stock pulled back to end the trading session at $154.52, up 1.82% from the previous day’s closing price of $151.76.
In the current housing market scenario, improving mortgage rates, pent-up demand and low existing house inventory are benefiting homebuilding and related companies like D.R. Horton. The benefit is reflected in increasing housing starts and sales volumes. As of Jan 4, 2024, according to Freddie Mac, the average 30-year, fixed-rate mortgage is 6.62%, up from 6.61% on Dec 28, 2023, but down from 6.67% on Dec 21, 2023. Although the rates remain elevated (6.48% on Jan 5, 2023) on a year-over-year basis, the Fed’s recent decision to keep the interest rate benchmark between 5.25% and 5.5% along with indication about possible rate cuts in 2024 are expected to push the mortgage rates down further.
Apart from macro tailwinds, the company is also benefiting from accretive acquisitions, land investments and home affordability initiatives.
Price Performance
This Zacks Rank #3 (Hold) company’s shares have gained 51% in the past three months, outperforming the Zacks Building Products - Home Builders industry’s 41.1% growth, the Zacks Construction sector’s 22.2% increase and the S&P 500 Index’s 9.5% rise.
Image Source: Zacks Investment Research
The company’s earnings estimate for fiscal 2024 has moved north to $14.15 per share from $14.14 per share in the past seven days. The stock portrays a positive trend, indicating robust fundamentals and elevating the expectation of outperformance in the near term, despite an uncertain housing market scenario.
Driving Factors
Favorable Macro Scenario: D.R. Horton seems to be benefiting from the current housing market scenario, wherein the existing homes inventory is low and mortgage rates are sequentially improving but remain elevated year over year. The Fed’s announcement of stabilizing the interest rate range between 5.25% and 5.5% induced optimism throughout the housing market, thus aiding homebuilding and related companies. Morever, the decision of the Fed to cut rates in 2024 is the cherry on the cake, given the improving scenario, as it will help reduce mortgage rates and increase affordability.
Strategic Investments: D.R. Horton indulges in strategic investments that aid its growth prospects. The investments are evident in its accretive acquisitions and land purchases. As acquisitions are an important part of the company’s growth strategy, it is fast acquiring homebuilding companies in desirable markets.
The acquisition of the homebuilding operations of Truland Homes, in July 2023, added 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. Furthermore, in fiscal 2023, the company’s homebuilding investments in lots, land and development for the quarter add up to $8 billion, up 6% year over year. DHI’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.
Home Affordability: D.R. Horton is witnessing growth during the uncertain economic scenario from its strategic shift toward more entry-level affordable homes. The current scenario showcases high demand and low sales of existing homes, which are benefiting this homebuilding company. First-time homebuyers represented 55% of its closings in fourth-quarter fiscal 2023.
To counter the adverse impacts of the current market uncertainties to some extent, the company has increased its use of incentives and is focusing on reducing the size of its homes, under possible scenarios, to improve house affordability. It anticipates to continue with this strategy through fiscal 2024 as well.
Key Picks
Here are some better-ranked stocks from the same sector.
Martin Marietta Materials, Inc. (MLM - Free Report) currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MLM delivered a trailing four-quarter earnings surprise of 37.3%, on average. The stock has gained 42.2% in the past year. The Zacks Consensus Estimate for MLM’s 2024 sales and earnings per share (EPS) indicates growth of 9.2% and 13.8%, respectively, from a year ago.
Armstrong World Industries, Inc. (AWI - Free Report) presently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 7.9%, on average. Shares of AWI have increased 35.4% in the past year.
The Zacks Consensus Estimate for AWI’s 2024 sales and EPS indicates a rise of 1.3% and 6.8%, respectively, from the prior-year levels.
Taylor Morrison Home Corporation (TMHC - Free Report) currently sports a Zacks Rank of 1. TMHC delivered a trailing four-quarter earnings surprise of 17.5%, on average. The stock has gained 57.4% in the past year.
The Zacks Consensus Estimate for TMHC’s 2024 sales indicates an improvement of 0.8% while the same for EPS indicates a decline of 6.6%, respectively, from a year ago.