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Earnings Estimates Rising for D.R. Horton (DHI): Will It Gain?

Zacks Equity Research

Investors might want to bet on D.R. Horton (DHI), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this homebuilder, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For D.R. Horton, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

For the current quarter, the company is expected to earn $1.66 per share, which is a change of +22.96% from the year-ago reported number.

The Zacks Consensus Estimate for D.R. Horton has increased 39.89% over the last 30 days, as 15 estimates have gone higher compared to no negative revisions.

Current-Year Estimate Revisions

The company is expected to earn $5.73 per share for the full year, which represents a change of +33.57% from the prior-year number.

The revisions trend for the current year also appears quite promising for D.R. Horton, with 16 estimates moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 18.73%.

Favorable Zacks Rank

Thanks to promising estimate revisions, D.R. Horton currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on D.R. Horton because of its solid estimate revisions, as evident from the stock's 16.7% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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