D.R. Horton (DHI) Earnings Preview: Q4 Report Expected Tuesday

in EARNINGS/INVESTING IDEAS by

The U.S. housing market has been in down trend for the last couple years. Despite industry headwinds, D.R. Horton, Inc. (NYSE:DHI) has managed to report strong new orders. The stock price has been rallying all year as a result:

D.R. Horton Stock Price

Will management continue to deliver?

D.R. Horton is scheduled to report Q4 earnings results pre-market on November 12, 2019. The company is expected to report earnings of $1.25/share on revenue of $4.846 billion.

Expected to report EPS growth of $0.03/share for Q4, 2019
Metric Expected Prior Year YoY Change
Revenue $4,846.50 $4,505.20 7.6%
EPS $1.25 $1.22 2.5%

The consensus earnings per share (EPS) of $1.25/share is based on a poll of 15 analysts and represents a growth of 2.5% over the same quarter last year when the company reported earnings of $1.22/share.

The revenue forecast of $4.846 billion based on a poll of 11 analysts implies a year-over-year (YoY) growth of 7.6%. Last year the company reported $4.505 billion in revenue for the quarter.

Earnings Call Trends

Historically, management has exceeded analyst expectations 6 out of the last 8 tracked quarters, and met expectations 2 quarters.

What are your expectations from D.R. Horton for this earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q3, 2019 $1.04 $1.26 21.0% Beat
Q2, 2019 $0.86 $0.93 8.1% Beat
Q1, 2019 $0.76 $0.76 0.0% Meet
Q4, 2018 $1.22 $1.22 0.0% Meet
Q3, 2018 $1.07 $1.18 10.3% Beat
Q2, 2018 $0.86 $0.91 5.8% Beat
Q1, 2018 $0.65 $0.78 19.4% Beat
Q4, 2017 $0.81 $0.82 1.2% Beat

One question we always consider here at the Bankers’ Tribune is how important are earnings reports to D.R. Horton’s stock price performance? It’s more important for some companies than for others. In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2019, the stock price reacted by increasing by 4.4%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-07-30 $44 $45.93 4.4% Increase
2019-04-25 $46.67 $44 -5.7% Decline
2019-01-25 $38.30 $37.30 -2.6% Decline
2018-11-08 $37.59 $34.40 -8.5% Decline

Fundamentals And Technical Analysis

D.R. Horton is currently trading at $52.65/share, up 2.9% for the day ahead of earnings. The company is trading at approximately 96.7% of its 52 week high of $54.42/share. The company’s stock price is up 19.7% since the last earnings report and down -4.0% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 43.29 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 11.9x and a forward P/E multiple of 12.0x. D.R. Horton’s current share price also implies a price-to-book (P/B) multiple of 2.0x. The following table summarizes some other key fundamental ratios:

Data as of November 11, 2019
Metric Value
Last Fiscal Period FY2019.Q3
Period End Date June 30, 2019
Stock Price (Current) $52.65
P/E Ratio 11.9x
P/E Ratio (Fwd) 12.0x
PEG Ratio 1.7
Total Debt to Capital (%) 15.3%
Levered Free Cash Flow $129.6 million
Enterprise Value / EBITDA 10.4x

Company Profile: D.R. Horton, Inc.

D.R. Horton, Inc. is a large-cap stock with a market capitalization of $18.916 billion and a total enterprise value of $21.720 billion. The company operates in the Consumer Discretionary sector and Household Durables industry.

D.R. Horton, Inc. operates as a homebuilding company in East, Midwest, Southeast, South Central, Southwest, and West regions in the United States. It engages in the acquisition and development of land; and construction and sale of homes in 27 states and 81 markets in the United States under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, Freedom Homes, and Pacific Ridge Homes.

The company constructs and sells single-family detached homes; and attached homes, such as town homes, duplexes, and triplexes. It is also involved in the origination and sale of mortgages; and provision of title insurance policies, and examination and closing services, as well as engages in the residential lot development business. The company primarily serves homebuyers.

D.R. Horton, Inc. was founded in 1978 and is based in Arlington, Texas.

Expertise: Valuation, financial statement analysis. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing fairness opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset’s fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, AAII, Barron’s, Seeking Alpha and investing.com. Matt can be reached at matt@finbox.io or at +1 (516) 778-6257.

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