D.R. Horton to Report Q4 Earnings: What's in Store for the Stock?

D.R. Horton Inc. (DHI - Free Report) is set to release its fourth-quarter fiscal 2024 results on October 29, 2024, before the market opens.

In its previous quarter, the company exceeded the Zacks Consensus Estimate for both earnings and revenues, showing a growth of 7.9% and 2.9%, respectively. While this was a positive outcome, the earnings and revenues did see a year-over-year increase of 5% and 2%.

D.R. Horton has successfully reported better-than-expected earnings in 21 of its last 22 quarters, reflecting strong operational performance.

Estimates for D.R. Horton Stock

The Zacks Consensus Estimate for the upcoming quarter's earnings per share (EPS) remains at $4.20, unchanged over the last 60 days. This represents a 5.6% decline compared to the EPS of $4.45 from the same quarter last year. Additionally, the revenue consensus estimate stands at $10.25 billion, indicating a year-over-year decrease of 2.4%.

Factors Affecting DHI’s Q4 Results

Analysis suggests that D.R. Horton’s revenue in the fiscal fourth quarter will likely be impacted negatively by its Forestar and Rental Property segments. The company projects total revenues to fall between $10 billion and $10.4 billion this quarter, compared to $10.5 billion for the previous year. Furthermore, declining average selling prices (ASPs) for homes could also create challenges.

On a brighter note, D.R. Horton’s Homebuilding segment may show improved revenues due to an increase in the number of homes closed, largely driven by a shortage of existing homes in the market. The company's large market share, acquisitions, wide geographic reach, and affordable offerings across various brands are expected to support revenue growth.

Our projections estimate Homebuilding revenues to rise by 5.5% year-over-year to $9.28 billion in the upcoming quarter. This figure would also represent a slight increase of 0.5% from the previous quarter. However, the expected ASPs for homes closed are anticipated to drop by 0.7% year-over-year to approximately $380,400 in this quarter. D.R. Horton anticipates closing between 24,000 and 24,500 homes, with our estimates predicting a total of 24,352 homes closed, reflecting a year-over-year increase of 6.2%.

For Financial Services, we estimate revenues could reach $239.7 million, indicating a growth of 9.2% compared to a year ago. However, for Rental Property revenues, we predict a significant decline of 50.6% to $685.8 million, and expect Forestar revenues to decrease by 18.4% to $448.3 million.

Additional Projections

The rising costs of land, labor, and materials are likely to affect margins in the fourth quarter. The current tight labor market is an additional concern. D.R. Horton projects home sales gross margins to be around 24%, down from 25.1% in the same quarter last year.

D.R. Horton also anticipates selling, general, and administrative (SG&A) expenses as a proportion of revenues to be approximately 7%, up from 6.6% reported in the previous year. The pretax profit margin for Financial Services is expected to be around 35%, with an anticipated income tax rate between 24% and 24.3% for the quarter.

Our estimates indicate that net sales orders could increase by 14.5% year-over-year to 21,692 units. However, the backlog is anticipated to decrease from 15,197 units last year to 14,131 units. The value of the backlog is projected to be around $5.54 billion, a decline from $5.92 billion in the same quarter from the previous fiscal year.

Outlook for DHI

According to our model, the prospects for an earnings beat from D.R. Horton in the upcoming quarter seem unlikely. A stock requires a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), #2 (Buy), or #3 (Hold) to have such potential, which is not the case for DHI currently.

Earnings ESP: DHI's Earnings ESP stands at -0.42%. Understanding these projections can help investors make informed decisions regarding stock performance.

Zacks Rank: Currently, D.R. Horton holds a Zacks Rank of #4 (Sell).

Alternatives in the Construction Sector

Other companies within the Zacks Construction sector have more favorable prospects for exceeding earnings expectations. For instance, Louisiana-Pacific Corporation (LPX - Free Report) has an attractive Earnings ESP of +5.92% and a Zacks Rank of 3. LPX has consistently reported better-than-expected earnings, with an average surprise of 25.2%. However, earnings for the upcoming quarter are projected to decline by 45.1%.

UFP Industries, Inc. (UFPI - Free Report) also presents a positive situation with an Earnings ESP of +0.37% and a Zacks Rank of 3, despite an expected earnings decrease of 13.8% for the upcoming quarter.

Moreover, Howmet Aerospace Inc. (HWM - Free Report) has an Earnings ESP of +0.48% with a Zacks Rank of 2, indicating strong performance potential, with expected earnings growth of 41.3% year-over-year for the next reporting period.

Earnings, Stocks, D.R. Horton