Can D.R. Horton (DHI) Surprise This Earnings Season?

Zacks

D.R. Horton Inc. (DHI) is set to report its first-quarter fiscal 2014 results on Jan 28 before the market opens. Last quarter, D.R. Horton posted a negative surprise of 2.44%. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

Although, D.R. Horton has been seeing improving margins and profits, its top line has been relatively softer. D.R Horton’s net orders have slowed down in the second half of 2013 due to rise in interest/mortgage rates and increased home prices. In the past quarters, orders have been weak in the West, Midwest and Southwest segments while improving in East, Southeast and South Central regions. Most other homebuilders like PulteGroup Inc. (PHM) and Hovnanian Enterprises, Inc. experienced weak orders in the past few quarters.

However, D.R. Horton saw improving sales trend in Oct 2013, with net orders increasing year over year. Moreover, management has launched aggressive sales programs and offer incentives if sales trends do not improve by Jan/Feb 2014, which is the peak spring selling season. All these factors can drive order growth in the upcoming quarters.

Earnings Whisper?

Our proven model does not conclusively show that D.R. Horton is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is 0.00%.  

Zacks Rank: D.R. Horton carries a Zacks Rank #3 (Hold) which when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies from the industrial goods sector you may consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Meritage Homes Corp. (MTH), with Earnings ESP of +1.96% and a Zacks Rank #3 (Hold).

Primoris Services Corp. (PRIM), with Earnings ESP of +10.26% and a Zacks Rank #3 (Hold).

Read the Full Research Report on DHI
Read the Full Research Report on PHM
Read the Full Research Report on PRIM
Read the Full Research Report on MTH


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