D.R. Horton, Inc. (NYSE:DHI) investors will be delighted, with the company turning in some strong numbers with its latest results. The company beat both earnings and revenue forecasts, with revenue of US$5.4b, some 8.1% above estimates, and statutory earnings per share (EPS) coming in at US$1.72, 34% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the current consensus from D.R. Horton's 13 analysts is for revenues of US$21.4b in 2021, which would reflect a meaningful 13% increase on its sales over the past 12 months. Statutory earnings per share are predicted to increase 8.1% to US$6.04. In the lead-up to this report, the analysts had been modelling revenues of US$19.6b and earnings per share (EPS) of US$5.10 in 2021. There's been a pretty noticeable increase in sentiment, with the analysts upgrading revenues and making a solid gain to earnings per share in particular.
With these upgrades, we're not surprised to see that the analysts have lifted their price target 14% to US$73.20per share. 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$89.00 per share, while the most bearish prices it at US$58.00. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 13%, in line with its 12% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 6.2% next year. So although D.R. Horton is expected to maintain its revenue growth rate, it's definitely expected to grow faster than the wider industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around D.R. Horton's earnings potential next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple D.R. Horton analysts - going out to 2022, and you can see them free on our platform here.
Plus, you should also learn about the 2 warning signs we've spotted with D.R. Horton .
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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