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D.R. Horton (DHI) to Report Q4 Earnings: What's in Store?

D.R. Horton Inc. DHI is scheduled to report fourth-quarter fiscal 2020 (ended Sep 30, 2020) results on Nov 10, before the opening bell.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 35.4% and 7.2%, respectively. Earnings and revenues of this homebuilding company grew 36.5% and 9.9%, respectively, from the year-ago reported figures.

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

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has trended upward over the past 30 days to $1.76 per share. This indicates a 30.4% increase from the year-ago earnings of $1.35 per share. The consensus mark for revenues is $5.88 billion, suggesting a 18.2% year-over-year improvement.

D.R. Horton, Inc. Price and EPS Surprise

D.R. Horton, Inc. price-eps-surprise | D.R. Horton, Inc. Quote

Factors to Consider

D.R. Horton is likely to have witnessed impressive growth in fourth-quarter fiscal 2020, given resilient housing market conditions in the United States. The company’s fourth-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 record low mortgage rates, 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.

Solid housing market conditions are evident from improved monthly U.S. home sales data. Markedly, existing home sales grew for the fourth consecutive month in September, according to the National Association of Realtors. Single-family housing starts, the largest share of the housing market, jumped 8.5% to a rate of 1.108 million units last month. Overall, housing starts increased 1.9% to a seasonally adjusted annual rate of 1.415 million units last month.

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

The Zacks Consensus Estimate for Homebuilding revenues of $5.68 billion suggests a 17.3% increase from a year ago and 8.8% rise sequentially.

The same for Financial Services revenues of $158 million suggests a 17% increase from a year ago and 0.6% increase sequentially.

Meanwhile, lower average selling price to address affordability concern is expected to put pressure on the company’s results to some extent. Also, higher land, labor and material costs are expected to reflect on fiscal fourth-quarter 2020 margins.

Other Projections

The Zacks Consensus Estimate for homes closed is pegged at 19,000 units, implying an improvement of 18.6% from the year-ago period and a 7.7% increase from fiscal third-quarter 2020.

The consensus estimate for net sales orders is currently pegged at 17,193 units. This suggests a 30.9% increase from a year ago but 20.1% decline sequentially. The consensus estimate for the value of the backlog is $6.53 billion, implying a 6.9% decline from the fiscal third quarter.

What the Zacks Model Says

Our proven model predicts an earnings beat for D.R. Horton this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: D.R. Horton has an Earnings ESP of +2.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: D.R. Horton — which shares space with KB Home KBH, PulteGroup PHM and NVR, Inc. NVR in the Zacks Building Products - Home Builders industry — currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

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