What to Expect From D.R. Horton (DHI) This Earnings Season

D.R. Horton Inc. DHI is scheduled to report first-quarter fiscal 2022 (ended Dec 31, 2021) results on Feb 2, before the opening bell.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 8.8% and 4.1%, respectively. Earnings and revenues of this homebuilding company grew 65% and 26.7%, respectively, from the year-ago reported figures.

Markedly, D.R. Horton reported better-than-expected earnings in the last 11 quarters.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has trended 0.4% downward over the past seven days to $2.80 per share. Nonetheless, this indicates a 30.8% increase from the year-ago earnings of $2.14 per share. The consensus mark for revenues is $6.75 billion, suggesting a 13.8% year-over-year improvement.

Factors to Note

Fiscal first-quarter Homebuilding revenues (which account for 96.7% of total revenues) are expected to have increased from the year-ago level, buoyed by solid U.S. housing market fundamentals. D.R. Horton — one of the country’s largest homebuilders — has been benefiting from resilient housing market conditions backed by the lack of available supply and a highly motivated buyer. Also, buyers have been seeking homes in lower-density areas, thereby giving a boost to new home construction in such regions.

In addition, the company’s industry-leading market share, broad geographic footprint and affordable product offerings across multiple brands are expected to have aided revenues.

Yet, the U.S. housing market has been grappling with uncertainties arising from skyrocketing home prices. This may have impacted DHI’s orders.

Also, higher land, labor and material costs are expected to reflect on fiscal fourth-quarter margins to some extent. Importantly, the company has been witnessing significant supply chain disruptions, including shortages and delayed delivery of certain building materials along with a tight labor market. This may create difficulties in fulfilling customer demand, thereby affecting deliveries.

The Zacks Consensus Estimate for Homebuilding revenues of $6.5 billion suggests a 13.7% increase from a year ago.

The same for Financial Services revenues of $186 million suggests a 0.5% decrease from a year ago.

Other Projections

DHI expects to generate consolidated revenues of $6.5-$6.8 billion for the fiscal first quarter. It expects fiscal first-quarter homes closed within 17,500-18,500. The Zacks Consensus Estimate for homes closed is pegged at 18,341 units, implying a decline of 2.1% from the year-ago period.

DHI expects home sales gross margin for the fiscal first quarter to be in line sequentially. It expects the metric in the range of 26.8-27%. DHI anticipates homebuilding SG&A (as a percentage of revenues) for the fiscal first quarter to be 8%.

Financial services pre-tax profit margin is expected in the range of 30-35% and income tax rate to be 24% for the fiscal first quarter.

The company expects fiscal first-quarter net sales orders to be equal to or slightly higher than 20,418 sales orders in first-quarter fiscal 2021.

The consensus estimate for net sales orders is currently pegged at 20,595 units. This suggests a decrease from 20,418 units a year ago. The consensus estimate for the value of the backlog is $10.62 billion, implying an improvement from $8.94 billion in first-quarter fiscal 2021.

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 +2.72%. 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 #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks With Favorable Combination

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.

Boise Cascade (NYSE:BCC) Company BCC has an Earnings ESP of +9.09% and a Zacks Rank #1.

Shares of Boise Cascade have gained 44.9% over the past year. BCC’s earnings topped the consensus mark in all the last four quarters, with the average being 45.5%.

Louisiana-Pacific (NYSE:LPX) Corporation LPX has an Earnings ESP of +1.08% and a Zacks Rank #1.

Shares of Louisiana-Pacific have gained 61.7% over the past year. LPX’s earnings topped the consensus mark in all the last four quarters, with the average being 10.5%.

Martin Marietta Materials (NYSE:MLM), Inc. MLM has an Earnings ESP of +1.40% and a Zacks Rank #2.

Shares of MLM have gained 29.4% over the past year. In the trailing four quarters, MLM’s earnings topped the consensus mark twice but missed the same on the other two occasions, with the average surprise being 33.4%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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