D.R. Horton Inc.
) is scheduled to report third quarter fiscal 2013 (ending Jun
30) earnings before the opening bell on Jul 25, 2013.
Last quarter, D.R. Horton posted a positive surprise of 60%.
We expect the company to beat expectations in the third quarter
Why a Likely Positive Surprise?
Our proven model shows that D.R. Horton is likely to beat
earnings because it has the right combination of two key
Positive Zacks ESP:
The expected surprise prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
), which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is +8.57%. This is
meaningful and a leading indicator of a likely positive earnings
surprise for the shares.
Zacks Rank #1 (Strong Buy):
D.R. Horton carries a Zacks Rank #1 (Strong Buy). Note that
stocks with a Zacks Rank #1, #2 and #3 have a significantly
higher chance of beating earnings estimates. The sell rated
stocks (#4 and #5) should never be considered going into an
The combination of D.R. Horton's Zacks Rank #1 (Strong Buy)
and a positive ESP of +8.57% makes us confident of an earnings
beat on Jul 25.
What is Driving the Better-than-Expected
We believe that the steadily improving housing conditions will
boost both volume and prices for D.R. Horton homes in the third
quarter despite recent concerns about rising interest rates.
We believe that though interest rates are increasing of late,
they are still below historical levels and housing is still
increasingly affordable. Homebuilders have largely benefited from
historically-low interest rates, eventually leading to the sharp
increase in home buying activity since mid-2012. Moreover,
Federal Reserve Chairman, Ben Bernanke's comments last week to
keep interest rates low for some time has also provided some
relief to the housing industry. Low interest rates increase
demand for new homes as mortgage loans become cheaper; thus
improving the purchasing power of the buyer.
In addition to the brisk housing recovery, increased
investments in land in high-demand markets, efficient inventory
management and improved selling, general and administrative
(SG&A) expense ratio are expected to boost profits for D.R.
Horton in the upcoming quarters.
D.R. Horton has been witnessing solid year-over-year growth in
new home orders, average selling prices and home closings for the
past few quarters. D.R. Horton has in fact delivered 6
consecutive positive earnings surprises, with an average of
31.25% for the past four quarters.
Other Stocks to Consider
Here are some other homebuilding companies that can be
considered as our model shows that they have the right
combination of elements to post an earnings beat this
), Earnings ESP of +3.45% and Zacks Rank #1.
MDC Holdings Inc.
), Earnings ESP of +3.64% and Zacks Rank #1.
Ryland Group Inc
), Earnings ESP of +15.63% and Zacks Rank #1.
D R HORTON INC (DHI): Free Stock Analysis
MDC HLDGS (MDC): Free Stock Analysis Report
PULTE GROUP ONC (PHM): Free Stock Analysis
RYLAND GRP INC (RYL): Free Stock Analysis
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