D.R. Horton (DHI) to Post Q2 Earnings: What's in the Cards?

Zacks Equity Research
·4-min read

D.R. Horton Inc. DHI is scheduled to report second-quarter fiscal 2021 (ended Mar 31, 2021) results on Apr 22, before the opening bell.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 24.4% and 6.1%, respectively. Earnings and revenues of this homebuilding company grew 84% and 47.6%, respectively, from the year-ago reported figures.

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

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has trended 0.5% upward over the past seven days to $2.20 per share. This indicates a 69.2% increase from the year-ago earnings of $1.30 per share. The consensus mark for revenues is $6.17 billion, suggesting a 37.1% year-over-year improvement.

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

D.R. Horton, Inc. Price and EPS Surprise
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 is likely to have witnessed impressive growth in second-quarter fiscal 2021, given resilient housing market conditions in the United States. The company’s fiscal second-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 historically 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.

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 $6.03 billion suggests a 37.7% increase from a year ago.

The same for Financial Services revenues of $177 million suggests a 68.6% increase from a year ago.

Meanwhile, higher land, labor and material costs (especially lumber) are expected to reflect on fiscal second-quarter margins.

Other Projections

The company expects to generate consolidated revenues of $6-$6.2 billion. Homes closed are likely to be between 19,000 and 19,500 homes, depicting an increase from 14,539 units a year ago. It expects home sales gross margin for the fiscal second quarter to be 24.1% and homebuilding SG&A to be 7.9% of homebuilding revenues. In the year-ago period, home sales gross margin was 21.3% and homebuilding SG&A was 8.3%.

The Zacks Consensus Estimate for homes closed is pegged at 19,544 units, implying an improvement of 34.4% from the year-ago period.

The consensus estimate for net sales orders is currently pegged at 24,626 units. This suggests a 22.6% increase from a year ago. The consensus estimate for the value of the backlog is $10.65 billion, implying an 81% improvement from second-quarter fiscal 2020.

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: The company has an Earnings ESP of +9.09%. 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks With Favorable Combination

Here are some other companies in the Zacks Construction sector, which according to our model also have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Martin Marietta Materials, Inc. MLM has an Earnings ESP of +10.77% and a Zacks Rank #2.

Masco Corporation MAS has an Earnings ESP of +6.76% and holds a Zacks Rank #3.

United Rentals, Inc. URI has an Earnings ESP of +6.27% and a Zacks Rank #2.

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