What’s in Store for the Stock?

D.R. Horton Inc. DHI is slated to report first-quarter fiscal 2025 (ended Dec. 31, 2024) results on Jan. 21, before the opening bell.

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In the last reported quarter, the company’s earnings and revenues missed the Zacks Consensus Estimate by 6.7% and 2.4%, respectively. Also, the metrics declined 11.9% and 4.8% from the year-ago figures.

Markedly, D.R. Horton reported better-than-expected earnings in 17 of the last 20 quarters.

The Zacks Consensus Estimate for the quarter’s earnings per share (EPS) has remained unchanged at $2.40 over the past 60 days. The estimated figure indicates a decline of 14.9% from the year-ago level of $2.82.

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The consensus mark for revenues is pinned at $7.13 billion, indicating a 7.7% year-over-year decline.

Revenues

D.R. Horton’s total revenues in the fiscal first quarter are likely to have registered weakness from its Homebuilding and Rental Property segments. DHI anticipates total revenues to be between $6.8 billion and $7.3 billion compared with $7.7 billion reported a year ago.

Under the Homebuilding segment (which contributed 89.5% of fourth-quarter fiscal 2024 total revenues), the revenues are expected to have declined due to a decrease in homes closed given the still high mortgage rates circulating the housing market.

Although a declining interest rate has eased the borrowing costs to some extent, the expectations of lower rate cuts and persisting inflation have been marring prospects. The company expects total homes closed to be between 17,500 and 18,000 units during the first quarter, down from 19,340 in the year-ago quarter.

Our model predicts Homebuilding revenues to decline 8.4% year over year to $6.69 billion. Our model predicts homes closed to be 17,777 units, down 8.1% year over year.

We expect Rental Property (which contributed 7% of fourth-quarter fiscal 2024 total revenues) revenues to be $184.5 million, which implies a 5.6% decline from the year-ago level. We expect Forestar (which contributed 5.5% of fourth-quarter fiscal 2024 total revenues) revenues to be $3.15.1 million, which indicates 3% growth from the year-ago level.

We expect the Financial Services segment’s (which contributed 2.2% of fourth-quarter fiscal 2024 total revenues) revenues to be $197.3 million, which indicates an increase of 2.5% from the year-ago level.

Margins

A persisting inflationary environment, along with concerns for labor and material supply, are expected to have pushed down the fiscal first-quarter margins. Also, costs associated with the expansion of DHI’s operating platform are likely to have added to the downtick. The company expects the home sales gross margin for the fiscal first quarter to be about 22.5%. Our model predicts home sales gross margins to contract to 22.4% from 22.9% reported a year ago.

DHI expects homebuilding SG&A, as a percentage of revenues, to be approximately 8.9% (compared with 8.3% reported a year ago). Financial Services’ pretax profit margin is likely to be 20% and the income tax rate is expected to be approximately 24.5% in the quarter.

Orders & Backlog

For the fiscal first quarter, our model predicts net sales orders to increase 3.1% year over year to 18,629 units. The same for backlog is currently pegged at 13,032 units, which indicates a decrease from the 13,965 units reported a year ago. Our model predicts the value of the backlog to be $5.07 billion, implying a decline of 6.8% year over year.

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