Will D.R. Horton Beat Earnings Estimates Once Again in Q3?
D.R. Horton, Inc. DHI is scheduled to report third-quarter fiscal 2020 earnings before markets open on Jul 28. Shares of the homebuilding company, which have soared 21.1% since the beginning of this year, have outperformed the broader S&P 500 Index’s rise of just 2%.
The company has surpassed the Zacks Consensus Estimate in seven of the trailing 10 quarters. D.R. Horton carries a Zacks Rank #1 (Strong Buy).
Factors Impacting the DHI Stock
The quarter ended June 2020 has been a period of impressive growth for the homebuilding stock. A major reason behind its growth is the loose monetary policy by Federal Reserve, which drove mortgage rates lower.
In June, the Federal Reserve decided to keep the benchmark rates unchanged (as decided by the central bank in mid-March) to put the U.S. economy back on track. The rates, which are currently in the range of 0% to 0.25%, are expected to stay at this level for the next two and a half years. In addition, the solid rise in nonfarm payrolls since May has also put housing market in a sweet spot, thus putting DHI stock in the limelight.
D.R. Horton’s strategic move toward more entry-level affordable homes has clearly supported the company’s profits. This is because the segment experienced strong demand and limited supply. In fact, in second-quarter fiscal 2020, first-time homebuyers represented 53% of D.R. Horton’s closings, indicating the inclination of the first-time home-buying client toward affordable homes.
Second, the company has consistently tried to reduce both construction and selling along with general and administrative expenses. D.R. Horton controls construction costs by designing homes proficiently and also by procuring construction materials and labor at competitive prices.
Finally, D.R. Horton boasts a healthy balance sheet. The company has been actively managing cash flows, returning much of its free cash to investors via share repurchases and dividends. During the first six months of fiscal 2020, the homebuilding company paid dividends worth $128.7 million and repurchased $360.4 million shares.
Q3 Fiscal 2020 Earnings and Revenue Expectations
The Zacks Consensus Estimate for D.R. Horton’sthird-quarter fiscal 2020 earnings is $1.27 per share, which is 0.79% higher than the year-ago earnings per share of $1.26. The Zacks Consensus Estimate for the company’s third-quarter fiscal 2020 revenues is $5.03 billion, which also exceeds year-ago sales of $4.88 billion by 2.98%.
Given the promising housing market in the country right now, one may expect the company to beat the Zacks earnings and revenues expectations for third-quarter fiscal 2020.
In fact, the Zacks Consensus Estimate for D.R. Horton’s current-year earnings has moved 6.7% north in the past 60 days. D.R. Horton, which belongs to the Zacks Building Products - Home Builders industry, has an expected earnings growth rate of 14.5% for the current year.
Finally, our proprietary model predicts an earnings beat for D.R. Horton in second-quarter 2020. The combination of a positive Earnings ESP and a Zacks Rank #1, 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. In this case, the stock fulfills the criteria. D.R. Horton has an Earnings ESP of +4.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
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