D.R. Horton Inc. DHI is slated to report fourth-quarter fiscal 2024 (ended Sept. 30, 2024) results on Oct. 29, before the opening bell.

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In the last reported quarter, the company’s earnings and revenues beat the Zacks Consensus Estimate by 7.9% and 2.9%, respectively. Yet, earnings and revenues of this homebuilding company grew 5% and 2% from the year-ago reported figures.

Markedly, D.R. Horton reported better-than-expected earnings in 21 of the last 22 quarters.

D.R. Horton, Inc. Price and EPS Surprise

D.R. Horton, Inc. price-eps-surprise | D.R. Horton, Inc. Quote

How Are Estimates Placed for D.R. Horton Stock?

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share (EPS) has remained unchanged at $4.20 over the past 60 days. The estimated figure indicates a 5.6% decrease from the year-ago EPS of $4.45. The consensus mark for revenues is $10.25 billion, indicating a 2.4% year-over-year decline.

Factors Influencing DHI’s Q4 Results

D.R. Horton’s total revenues in the fiscal fourth quarter might have registered weakness from its Forestar and Rental Property segments. DHI anticipates total revenues of $10-$10.4 billion for the fiscal fourth quarter compared with $10.5 billion a year ago. Also, lower average selling prices (ASPs) for homes delivered is an added headwind.

Nonetheless, D.R. Horton’s Homebuilding revenues are expected to have improved in the fiscal fourth quarter from the year-ago level owing to a higher number of homes closed, given a lack of existing homes for sale in the market. Also, the company’s industry-leading market share, acquisitions, broad geographic footprint and affordable product offerings across multiple brands might have somewhat aided the top line.

Our model predicts Homebuilding revenues to grow 5.5% year over year to $9.28 billion in the to-be-reported quarter. The metric is expected to have improved 0.5% from the prior quarter. The ASPs of homes closed is expected to be down 0.7% year over year to $380,400 in the fiscal fourth quarter. The company expects homes closed to be within 24,000-24,500 units. Our model predicts homes closed to be 24,352 units, up 6.2% year over year and 0.8% sequentially.

We expect Financial Services revenues of $239.7 million, which indicates an increase of 9.2% from the year-ago level.

We expect Rental Property revenues of $685.8 million, which implies a 50.6% decline from the year-ago level. We expect Forestar revenues of $448.3 million, which suggests a 18.4% decline from the year-ago level.

Other Projections

Meanwhile, higher land, labor and material costs are expected to have reflected in the fiscal fourth-quarter margins. The tight labor market is a concern. DHI expects the home sales gross margin for the fiscal fourth quarter to be 24%. Our model predicts home sales gross margins to contract to 24% in the fiscal fourth quarter from 25.1% a year ago.

DHI expects homebuilding SG&A, as a percentage of revenues, of approximately 7% (compared with 6.6% reported a year ago). Financial Services pretax profit margin is likely to be 35%, and the income tax rate is expected to be in the range of 24%-24.3% in the quarter.

Our model predicts net sales orders to increase 14.5% year over year to 21,692 units. The same for backlog is currently pegged at 14,131 units, which indicates a decrease from 15,197 units reported a year ago. Our model predicts the value of the backlog to be $5.54 billion, implying a decline from $5.92 billion in the corresponding fiscal 2023 quarter.

What the Zacks Model Unveils for DHI

Our proven model does not predict an earnings beat for D.R. Horton for the quarter to be reported. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: DHI has an Earnings ESP of -0.42%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: D.R. Horton currently carries a Zacks Rank #4 (Sell).

Stocks With Favorable Combinations

Here are some other companies in the Zacks Construction sector, which, according to our model, have the right combination of elements to beat on earnings in their respective quarters to be reported.

Louisiana-Pacific Corporation LPX has an Earnings ESP of +5.92% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

LPX reported better-than-expected earnings in each of the last four quarters, the average surprise being 25.2%. The company’s earnings for the to-be-reported quarter are expected to decline 45.1%.

UFP Industries, Inc. UFPI currently has an Earnings ESP of +0.37% and a Zacks Rank of 3.

UFPI’s earnings for the to-be-reported quarter are expected to decrease 13.8%. The company reported better-than-expected earnings in two of the last four quarters and missed on other two occasions, the average surprise being 4.6%.

Howmet Aerospace Inc. HWM currently has an Earnings ESP of +0.48% and a Zacks Rank of 2.

HWM’s earnings topped the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 10.9%. Earnings for the to-be-reported quarter are expected to increase 41.3% year over year.

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