As the largest publicly traded in the U.S.,
D.R. Horton
‘s earnings could serve as an outlook for the broader housing market, one analyst says.
“They are in so many markets and states that you get a super comprehensive view of the national housing market,” said Carl Reichardt, a BTIG analyst covering the builders.
D.R. Horton, the largest public builder by market capitalization, will report its fourth-quarter and full-year earnings on Tuesday morning before the start of trading. Analysts expect that the company earned $3.94 a share in the quarter on $10 billion in revenue, according to FactSet. For the full year, analysts estimate earnings of $13.33 a share on about $35 billion in revenue.
Such a result would fall short of 2022’s earnings per share of $16.51, according to FactSet. D.R. Horton’s sales are expected to beat 2022’s revenue of $33.5 billion, but its home sales gross margin, at 23.3%, is expected to be narrower than last year’s nearly 29% margin.
Such headwinds are old news to investors. David Auld, D.R. Horton’s former CEO and current vice chairman of the board, addressed the shortage on the company’s most recent earnings call in July. “Our homebuilding operating margins are lower than the record high margins we reported last year due to cost inflation and pricing adjustments and incentives we implemented to address homebuyer affordability challenges caused by higher mortgage rates,” Auld said.
It’s not just a headwind for D.R. Horton: As mortgage rates climbed in late 2022, 36% of builders surveyed by the National Association of Home Builders said they were offering incentives to bolster sales or limit cancellation. That percentage fell earlier this year as mortgage rates held steady but increased in recent months as mortgage rates climbed toward a 23-year high.
D.R. Horton’s earnings call on Tuesday will give investors more information about the kinds of incentives builders needed to offer buyers in order to move inventory, Reichardt said.
The year’s results are likely of less importance to investors than the company’s outlook—particularly because D.R. Horton is the first large public builder to report fourth-quarter and full-year earnings. The analyst expects more detailed fiscal 2024 guidance from Horton on the call than what other companies provided in their recent earnings.
“Some of them have given a few elements of what ‘24 might look like,” Reichardt said, “but not very much numeric guidance when it comes to the income statement.”
Write to Shaina Mishkin at [email protected]
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