D.R. Horton Exceeds All Expectations

D.R.Horton Beats And Sets Guidance For 2022

D.R.Horton NYSE: DHI exceeded all expectations and that is saying something, we’ve had high expectations for the company and the industry for some time. The housing industry is in a golden age only marred by a shortage of workers and rising costs for materials. The demand for homes continues to exceed the industry’s capacity to deliver and that is clearly evident in the results. Results continue to impress but theres’ more, results are outpacing the consensus targets and the company is guiding the market even higher which is something we like to see. Add to that a very safe and growing dividend, and an active share repurchase program, and we see a recipe for higher share prices that could drive the stock up to a new all-time-high very soon. 

D.R. Horton Has Record Quarter 

D.R. Horton posted $8.1 billion in fiscal 4th quarter revenue to set a company record. The revenue is 26.6% above last year’s Q4, 60% above 2019 and beat the Marketbeat.com consensus by 420 basis points. The gain is driven by an 8% increase in closings compounded by higher selling prices that are expected to persist. Margins were positively impacted by the combination of demand strength and pricing widening 480 basis points to 21.3% This helped drive very solid gains on the bottom line with GAAP EPS of $3.70 growing 65% YOY and beating consensus by $0.31. 

The only bad news is that orders are slowing and the backlog is coming down. New orders fell 33% on homes-basis and 17% on a valuation basis aiding the 2% decline in the backlog. Even so, the company says demand is still high enough, and with the industry headwinds, to keep them from delivering homes in a timely fashion and is delaying the sale of new houses until later in the building process. Regardless of the headwinds, the company set its guidance for revenue in fiscal 2022 to a range of $32.5 to $33.5 billion compared to the analyst’s consensus of $32.48 and we see upside risk in the numbers. 

D.R. Horton Is A Cash-Flow Machine 

D.R. Horton doesn’t have the highest margins in the market but it does have a very healthy business and cash flow. The company has been putting that cash flow to good use over the past few years by increasing its dividend and buying back shares. The company says it bought back more than $212.5 million worth of shares during the last quarter or about 0.6% and we expect this trend to continue. As for the dividend, it is a low-yielding 0.93% but a safe payout and a growing payout. The company has increased for the last 8 years including the just-announced increase and can easily sustain annual increases far into the future. The company is only paying out about 7% of its earnings and is well-capitalized. 

The Technical Outlook: D.R. Horton Is Moving Higher 

Shares of D.R. Horton are up more than 3.5% in the wake of the Q4 earnings and guidance and look like they will continue moving higher. Price action has just completed a Head & Shoulders reversal at the bottom of a trading range making the top of the range the next likely target. The top of the range is near the $105 level where resistance may be strong. If price action can get above that level we see this stock advancing up to the $120 level. That compares to the Marketbeat.com consensus estimate of $105 and the Wall Street high price target of $125 set by Wedbush over the summer.