It's been a good week for D.R. Horton, Inc. (NYSE:DHI) shareholders, because the company has just released its latest full-year results, and the shares gained 6.3% to US$54.26. D.R. Horton reported US$18b in revenue, roughly in line with analyst forecasts, although earnings per share (EPS) of US$4.29 beat expectations, being 2.5% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest forecasts to see whether analysts have changed their mind on D.R. Horton after the latest results.
Following the latest results, D.R. Horton's nine analysts are now forecasting revenues of US$18.8b in 2020. This would be an okay 7.0% improvement in sales compared to the last 12 months. Earnings per share are expected to grow 12% to US$4.87. In the lead-up to this report, analysts had been modelling revenues of US$18.6b and earnings per share (EPS) of US$4.60 in 2020. Analysts seem to have become more bullish on the business, judging by their new earnings per share estimates.
There's been no major changes to the consensus price target of US$56.50, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values D.R. Horton at US$67.00 per share, while the most bearish prices it at US$50.00. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. We would highlight that D.R. Horton's revenue growth is expected to slow, with forecast 7.0% increase next year well below the historical 14%p.a. growth over the last five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.2% next year. So it's pretty clear that, while D.R. Horton's revenue growth is expected to slow, it's still expected to grow faster than the market itself.
The Bottom Line
The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards D.R. Horton following these results. Happily, there were no major changes to revenue forecasts, with analysts still expecting the business to grow faster than the wider market. The consensus price target held steady at US$56.50, with the latest estimates not enough to have an impact on analysts' estimated valuations.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for D.R. Horton going out to 2021, and you can see them free on our platform here.
You can also view our analysis of D.R. Horton's balance sheet, and whether we think D.R. Horton is carrying too much debt, for free on our platform here.
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