On Tuesday, D.R. Horton (NYSE:DHI), one of the largest home construction companies in the United States, saw its price target adjusted by BTIG. The firm reduced the target to $169.00 from $174.00 while maintaining a Buy rating on the stock. The revision follows a reevaluation of the company's earnings per share (EPS) estimates for 2024 and 2025, which have been decreased by approximately 3%.
The analysis conducted by BTIG did not alter the core homebuilding metric assumptions for D.R. Horton. However, the firm lowered its financial services and rental pre-tax income (PTI) forecasts. The 2024 financial services PTI estimate was decreased by $30 million, roughly $0.07 per share, due to an expected slight decline in capture rate and an increase in expenses.
The rental PTI estimate saw a reduction of $47 million, or about $0.11 per share, amid a challenging sales environment for multi-family and single-family rental properties, driven by uncertainties in capital markets and a cautious investor sentiment.
Additionally, the contribution of Forestar Group (NYSE:FOR) Inc., a real estate and natural resources company associated with D.R. Horton, to the latter's EPS was lowered.
BTIG decreased the 2024 Forestar PTI contribution estimate by $111 million, equating to $0.25 per share, as a larger portion of Forestar's business is expected to be from D.R. Horton. This change increases profit eliminations through D.R. Horton's income statement and defers lot profit recognition. Despite these adjustments, BTIG has not modified D.R. Horton's gross margin by reducing lot costs at this time.
The firm has also accounted for a minor increase in expected option walkaway charges, which are still forecasted to be down 42% compared to the fiscal year 2023. Consequently, BTIG's fiscal year 2024 EPS estimate for D.R. Horton has been lowered to $14.70 from $15.15, and the fiscal year 2025 estimate has been adjusted to $16.60 from $17.11.
D.R. Horton is expected to report its second fiscal quarter earnings on April 18, 2024. BTIG's estimates remain slightly above the consensus, with an expectation of $3.14 versus the FactSet estimate of $3.07. The firm continues to view D.R. Horton favorably, citing the company's strong local market-share positions, efficient production business model, geographic market reach, and focus on affordable entry-level homes as factors supporting its Buy rating.
InvestingPro Insights
Recent data from InvestingPro underscores D.R. Horton's (NYSE:DHI) robust position in the market. The company boasts a significant market capitalization of $49.46 billion, reflecting investor confidence and its sizeable footprint in the industry. Additionally, the stock's P/E ratio stands at an attractive 10.35 on a last twelve months basis as of Q1 2024, suggesting that shares may be reasonably valued relative to earnings. Importantly, D.R. Horton has demonstrated a commitment to shareholder returns, with a 20% dividend growth and a consistent dividend yield of 0.77%.
InvestingPro Tips highlight D.R. Horton's status as a prominent player in the Household Durables industry, with a track record of raising its dividend for 10 consecutive years and maintaining those payments for 11 years. This financial discipline, coupled with a high return over the last year and a large price uptick over the last six months of 50.62%, positions the company as a potentially attractive investment. For more in-depth analysis and additional tips, investors can explore InvestingPro, which offers PRONEWS24 for an extra 10% off on yearly or biyearly Pro and Pro+ subscriptions, and boasts 9 more InvestingPro Tips for D.R. Horton.
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