D.R. Horton (DHI) easily beat earnings and revenue estimates for the second quarter early Thursday, while giving upbeat revenue guidance for the full year. DHI stock popped in premarket trading, poised to jump out of buy range if the gains hold in the regular session.
D.R. Horton earnings are a heat check for the sector, with the housing market recovery in the spotlight.
In an earnings release, the leading homebuilder said “the spring selling season is off to an encouraging start.” It added demand improved during the quarter due to “normal seasonal factors,” despite higher mortgage rates and inflationary pressures.
D.R. Horton Earnings
Estimates: Analysts polled by FactSet expected D.R. Horton earnings to tumble 52% vs. a year earlier to $1.93 a share. Revenue was seen falling 19% to $6.452 billion.
Results: D.R. Horton earnings fell 32% to $2.73 per diluted share, crushing estimates. Revenue of $7.973 billion came in almost even with a year ago and well ahead of views.
Homes closed in the quarter fell 1% to 19,664 vs. the year-ago quarter, the company said in an earnings release. Net sales orders grew 73% sequentially from the first quarter.
Outlook: The company guided full-year revenue of $31.5 billion-$33 billion, above FactSet consensus estimates for $28.41 billion. Ahead of Thursday’s results, analysts were expecting full-year earnings per share of $9.17, down 44%.
“Although higher interest rates and economic uncertainty may persist for some time, the supply of both new and existing homes at affordable price points remains limited,” Board Chairman Donald Horton said in Thursday’s earnings release.
“Demographics supporting housing demand remain favorable,” he added.
DHI Stock Poised To Jump Out of Buy Range
Shares of D.R. Horton jumped 5% to 107 in early action on the stock market today. DHI stock topped a 99.09 cup-with-handle buy point in March. The buy range goes to 104.04.
Meritage Homes (MTH) was not yet active Thursday. Shares fell 0.9% to 125.78 Wednesday. MTH stock, an IBD Leaderboard member, notched a decade high Tuesday after a sharp rally since last October.
Other homebuilder stocks — including KB Home (KBH), Lennar (LEN) and PulteGroup (PHM) — were narrowly mixed Wednesday. KBH stock, Lennar and Pulte are in buy zones.
While D.R. Horton is kicking off homebuilder earnings, Meritage and Lennar will report next week.
Housing Market Recovery
Mortgage rates have pulled back from their October 2022 peak, providing a jolt to housing demand and sales, experts say. Homebuilder earnings are set to struggle for at least a few quarters, but housing stocks have raced ahead.
U.S. single-family housing starts increased for a second straight month in March, but single-family permits for future construction rose solidly.
Home prices rose sharply over the past two years, helping to fuel homebuilder stocks. Housing demand outpaced supply due to material and labor shortages.
D.R. Horton engages in the construction and sale of single-family housing. It claims to be the largest homebuilder by volume in the U.S. since 2002.
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