On Feb 19, 2014, we issued an updated research report on
D.R. Horton Inc
). On Jan 28, the homebuilder reported better-than-expected
first-quarter fiscal 2014 surpassing the Zacks Consensus Estimate
for both revenues and earnings due to improved market conditions.
In fact, the first-quarter results rebounded from a weak fourth
quarter of 2013.
Earnings soared 80% year over year driven by homebuilding
revenue growth of 33% and strong margins. Order trends improved
slightly after a slower second half of 2013 due to better housing
market conditions across most markets. Moreover, weekly sales
pace has accelerated in Jan 2014 which keeps D.R. Horton
optimistic for the upcoming peak spring selling season.
Management believes that it is well placed to capitalize on the
increased demand during the season with its strong balance sheet,
a strong supply of finished lots and homes in inventory and a
higher community count.
Estimates for this Zacks Rank #1 (Strong Buy) stock were
largely revised upwards after the announcement of strong
fourth-quarter results. The Zacks Consensus Estimate for fiscal
2014 increased 6.5% and that for 2015 grew 4.7% over the last 30
Most importantly, D.R. Horton's strong land position
positioned allows it to meet demand in fiscal 2014 and 2015.
Also, Management is also consistently reducing both construction
and overhead expenses. The company's profitability has remained
intact due to its cost control and productivity improvement
efforts. Its pre-tax margins have almost doubled from 5.6% in
2012 to 10.5% in fiscal 2013.
However, despite posting strong profits regularly, we would
like to see a substantial rebound in volumes. The company's sales
volume growth has moderated since the second half of fiscal 2013.
Net order trend in the past 2-3 quarters have been weaker than
the significant growth seen in the first half of 2013. The recent
increase in interest/mortgage rates and increasing home prices
has slowed order pace and traffic.
Moreover, recent increases in mortgage rates and lack of
overall economic recovery could hurt demand for new homes.
Stocks That Warrant a Look/Key Picks from the
Other stocks worth considering within this sector include
Taylor Morrison Home Corporation
MRV Engenharia e Participa
). While Taylor Morrison and MRV Engenharia enjoy a Zacks Rank
#1, Lennar carries a Zacks Rank #2 (Buy).
D R HORTON INC (DHI): Free Stock Analysis
LENNAR CORP -A (LEN): Free Stock Analysis
MRV ENGENHARIA (MRVNY): Get Free Report
TAYLOR MORRISON (TMHC): Free Stock Analysis
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