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Will D.R. Horton (DHI) Gain on Rising Earnings Estimates?

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D.R. Horton (DHI - Free Report) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this homebuilder, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

Consensus earnings estimates for the next quarter and full year have moved considerably higher for D.R. Horton, as there has been strong agreement among the covering analysts in raising estimates.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $1.22 per share for the current quarter, which represents a year-over-year change of 0%.

Over the last 30 days, the Zacks Consensus Estimate for D.R. Horton has increased 6.39% because 11 estimates have moved higher while one has gone lower.

Current-Year Estimate Revisions

For the full year, the earnings estimate of $4.11 per share represents a change of +0.49% from the year-ago number.

In terms of estimate revisions, the trend for the current year also appears quite encouraging for D.R. Horton. Over the past month, 13 estimates have moved higher compared to one negative revision, helping the consensus estimate increase 5.42%.

Favorable Zacks Rank

Thanks to promising estimate revisions, D.R. Horton currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on D.R. Horton because of its solid estimate revisions, as evident from the stock's 7.1% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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