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D.R. Horton (DHI) to Report Q3 Earnings: What's in Store?

D.R. Horton Inc. DHI is scheduled to report third-quarter fiscal 2020 (ended Jun 30, 2020) results on Jul 28, before the opening bell.

In the last reported quarter, the company’s earnings topped the Zacks Consensus Estimate by 16.1% but revenues missed the same by 1.6%. Earnings and revenues of this homebuilding company grew 39.8% and 9%, respectively, from the year-ago reported figures.

Markedly, D.R. Horton reported better-than-expected earnings in all the last five 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 $1.27 per share. This indicates a 0.8% increase from the year-ago earnings of $1.26 per share. The consensus mark for revenues is $5.03 billion, suggesting a 3% 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-eps-surprise | D.R. Horton, Inc. Quote

Factors to Consider

D.R. Horton is likely to have witnessed muted growth in third-quarter fiscal 2020 as the COVID-19 pandemic negatively impacted homebuying demand and order flow, especially in April. The company experienced lower pricing and revenue gains on the sale of mortgage loans and servicing rights in the secondary market in April.

Nonetheless, low mortgage rates, industry-leading market share, broad geographic footprint and affordable product offerings across multiple brands are expected to have aided its revenues to some extent.

The Zacks Consensus Estimate for Homebuilding revenues (accounting for nearly 97% of revenues) of $4.89 billion suggests a 4.6% increase from $4.76 billion recorded a year ago and 2.9% rise sequentially.

The same for Financial Services revenues of $119 million suggests a 0.8% decrease from $120 million recorded a year ago but 13.3% increase sequentially.

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

Other Projections

The Zacks Consensus Estimate for homes closed is pegged at 16,611 units, implying an improvement of 4% from 15,971 units reported in the year-ago period and 14.3% increase from fiscal second-quarter 2020.

The consensus estimate for net sales orders is currently pegged at 14,646 units. This suggests a 6% decrease from 15,588 homes recorded a year ago and 27.1% decline sequentially. The same for backlog is pegged at 17,363 homes, suggesting growth of 5.2% year over year but 10.2% fall sequentially. The consensus estimate for value of the backlog is $5.24 billion, implying a rise of 5.5% from the prior year but decline 10.9% from the fiscal second quarter.

The consensus mark for sales order cancellation rates is currently pegged at 27.9%, indicating an increase from 20% reported in the year-ago period and 19% in the prior 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 +4.33%. 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 #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks Worth a Look

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.

Thor Industries, Inc. THO has an Earnings ESP of +42.64% and carries a Zacks Rank #1.

United Rentals, Inc. URI has an Earnings ESP of +20.51% and holds a Zacks Rank #1.

TopBuild Corp. BLD has an Earnings ESP of +15.61% and holds a Zacks Rank #1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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