D.R. Horton, Inc. DHI touched a new 52-week high of $116.26 on Jun 7. The stock pulled back to end the trading session at $113.95, down 1.15% from the previous day’s closing price of $115.27.
The company is benefiting from a strategic shift toward more entry-level affordable homes. Also, its production capabilities, solid acquisition strategy, broad geographic footprint and diverse product offerings across multiple brands bode well.
DHI has gained 55.2% in the past year compared with the Zacks Building Products - Home Builders industry’s growth of 48.9%, the Zacks Construction sector’s increase of 16.8% and S&P 500 Index’s growth of 6.5%.
Image Source: Zacks Investment Research
Earnings estimates for fiscal 2023 have moved up to $11.25 per share from $11.01 in the past 30 days. The positive trend signifies bullish analyst sentiments, indicating robust fundamentals and sparking the expectation of outperformance in the near term.
DHI highlighted that net sales orders increased 73% in second-quarter fiscal 2023 from the previous quarter. The company believes that housing demand will remain favorable, courtesy of a limited supply of new and existing homes at affordable price points despite challenging market conditions, comprising higher rates and uncertain economic conditions.
Let’s delve deeper into the factors favoring this Zacks Rank #1 (Strong Buy) company. You can see the complete list of today’s Zacks #1 Rank stocks here.
Solid Land Investments: D.R. Horton’s strong cash position and low debt/capital ratio allowed it to make strategic land purchases even during the downturn, in turn, giving it a significant competitive advantage. The company has selectively invested in attractively-priced land and lots in the past few years allowing it to bring new attractive communities in desirable markets. For the first and second quarters of fiscal 2023, the company invested $900 million and $980 million in finished lots, $690 million and $590 million in land development, and $130 million and $150 million in acquiring land, respectively.
Profit From Entry-Level Homes: D.R. Horton’s strategic shift toward more entry-level affordable homes has been paying off, with the segment experiencing strong demand and limited supply. First-time homebuyers represented 55% of its closings in second-quarter fiscal 2023.
High-Return Strategies: DHI strategically manages pricing, incentives and sales pace across its markets in a manner that will optimize the returns on inventory investments. It believes a consistent sales pace through inventory turnover is the best way to maximize profits and returns. With 547,000 lots (25% were owned and 75% controlled through purchase contracts) in inventory at the end of second-quarter fiscal 2023, D.R. Horton is well-poised for the future.
Other Key Picks
Some other better-ranked stocks that investors may consider from the same sector include Martin Marietta Materials, Inc. MLM, Vulcan Materials Company VMC and Watsco, Inc. WSO.
Martin Marietta currently sports a Zacks Rank #1. MLM delivered a trailing four-quarter earnings surprise of 31%, on average. Shares of the company have gained 25.3% in the year-to-date period.
The Zacks Consensus Estimate for MLM’s 2023 sales and EPS indicates growth of 19% and 32.1%, respectively, from the previous year’s reported levels.
Vulcan currently carries a Zacks Rank #1. VMC has a trailing four-quarter earnings surprise of 7.1%, on average. Shares of the company have gained 17.1% in the year-to-date period.
The Zacks Consensus Estimate for VMC’s 2023 sales and EPS indicates growth of 5.9% and 26.2%, respectively, from the previous year’s reported levels.
Watsco currently carries a Zacks Rank #2 (Buy). WSO delivered a trailing four-quarter earnings surprise of 5.3%, on average. Shares of the company have gained 39.7% in the year-to-date period.
The Zacks Consensus Estimate for WSO’s 2023 sales and EPS indicates growth of 3.1% and 2.2%, respectively, from the previous year’s reported levels.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report