D.R. Horton Q2 earnings: is the housing recession over?

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on Apr 20, 2023
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  • D.R. Horton reports a strong Q2 and issues upbeat future guidance.
  • Economist Omodunbi is still bearish on the housing market at large.
  • D.R. Horton stock is now up more than 20% versus the start of 2023.

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Shares of D.R. Horton Inc (NYSE: DHI) are up more than 5.0% this morning after the home construction company reported strong results for its second financial quarter.

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Economist’s view on the housing market

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More importantly, its guidance topped Street estimates as well.

D.R. Horton expected its revenue to fall between $31.5 billion and $33 billion this year. In comparison, analysts were at $28.4 billion. Still, PNC economist Abbey Omodunbi said today on Yahoo Finance Live:

We expect mortgage rates to remain elevated through 2023. Consumer is very concerned about economy, inflation, rates and we expect the downturn [in housing market] which started in fall of 2022 to continue through 2023.

Year-to-date, D.R. Horton stock is up more than 20% at writing.

Is D.R. Horton stock a buy now?

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D. R. Horton reported a 43% year-over-year decline in its backlog to 19,237 homes, as per the earnings press release.

Those interested in buying D.R. Horton stock following the earnings report today should also know that a JPMorgan analyst downgraded this homebuilder to “neutral” last month.

Michael Rehaut agreed in a recent note that the home construction company has above-average fundamentals but said it’s already factored into its premium valuation. His $102 price target suggests about a 5.0% downside from here.

We anticipate some moderation in demand in coming months. We point to already strong decline in MBA Purchase Application Index – which should [make] investors more hesitant given the stock’s strength since June 2022.

Notable figures in D.R. Horton Q2

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  • Net income printed at $942.2 million versus the year-ago $1.44 billion
  • Per-share earnings also declined significantly from $4.03 to $2.73
  • Revenue slid 0.3% on a year-over-year basis to $7.97 billion
  • FactSet consensus was $1.93 a share on $6.45 billion in revenue
  • Pre-tax profit margin narrowed sharply from 23.5% to 15.6%
  • Net sales orders and home sales gross margin tanked 5% and 7.3%

Also on Thursday, data from the National Association of Realtors confirmed that existing home sales declined 2.4% in March.

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