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D.R. Horton Inc. (DHI - Free Report) is slated to report first-quarter fiscal 2023 (ended Dec 31, 2022) results on Jan 24, before the opening bell.

In the last reported quarter, the company’s earnings and revenues lagged the Zacks Consensus Estimate by 7.7% and 4%, respectively. Yet, earnings and revenues of this homebuilding company grew 26% and 19%, respectively, from the year-ago reported figures.

Markedly, D.R. Horton reported better-than-expected earnings in 14 of the last 15 quarters.
 

The Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings has moved south over the past seven days to $2.25 from $2.26 per share. This indicates a 29% decrease from the year-ago earnings of $3.17 per share. The consensus mark for revenues is $6.5 billion, suggesting a 7.9% year-over-year decline.
 

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

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

Factors to Note

D.R. Horton’s Homebuilding revenues are expected to have declined in the fiscal first quarter from the year-ago level due to soft housing demand and prevailing industry headwinds. The U.S. housing market has been grappling with uncertainties arising from high mortgage rates. This may have impacted DHI’s revenues and orders in the to-be-reported quarter. DHI anticipates total revenues of $6-$6.8 billion.

Also, higher land, labor, and material costs are expected to reflect on fiscal first-quarter margins to some extent. The company has been witnessing significant supply-chain disruptions, including shortages and delayed delivery of certain building materials and a tight labor market. These may have created difficulties for DHI in fulfilling customer demand, thereby affecting deliveries.

The Zacks Consensus Estimate for Homebuilding revenues of $6.21 billion suggests a 7.1% decrease from a year ago. The Zacks Consensus Estimate for the average selling price of homes closed is pegged at $387,000, suggesting growth from the year-ago level of $384,000.

The same for Financial Services revenues of $148 million suggests a fall of 19.6% from the year-ago level of $184 million.

For the fiscal first quarter, lower lumber prices and a higher average price of settlements are helping this one of the country’s largest homebuilders. In addition, the company’s industry-leading market share, broad geographic footprint, and affordable product offerings across multiple brands may have somewhat aided the top line.
 

Other Projections

DHI expects fiscal first-quarter homes to close within 15,000-16,500. The Zacks Consensus Estimate for homes closed is pegged at 15,676 units, suggesting a fall of 14.8% from the year-ago period.

DHI expects the home sales gross margin for the fiscal first quarter to be within a 23-24% range. DHI anticipates homebuilding SG&A (as a percentage of revenues) for the fiscal first quarter to be 8-8.4%.

Financial services’ pre-tax profit margin is expected to be around 20%. The income tax rate is likely to be 23% for the fiscal first quarter. DHI expects home orders to decline 25-30% in the fiscal first quarter.

The consensus estimate for net sales orders is currently pegged at 18,394 units. This suggests a decrease from 21,522 units a year ago. The same for the backlog is currently pegged at 18,400 units, which suggests a decrease from 29,347 units a year ago. The consensus estimate for the value of the backlog is $7.33 billion, implying a significant decline from $11.063 billion in the corresponding fiscal 2022 quarter.
 

What the Zacks Model Unveils

Our proven model does not conclusively 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. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: DHI has an Earnings ESP of -4.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #3. 

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