Investors watch for rising homebuilder confidence

DR Horton, Meritage Homes and PulteGroup are expected to post results Thursday morning.

By Benzinga Jul 23, 2014 1:18PM

Image: Home under construction © CorbisBy Nelson Hem

The earnings crunch is well underway, and leading homebuilders D.R. Horton (DHI), Meritage Homes (MTH) and PulteGroup (PHM) will be taking their turns in the earnings spotlight Thursday before the markets open.

KB Home (KBH) and Lennar (LEN) posted better-than-expected results in late June on higher home prices and strong demand. Investors will be looking for rising homebuilder confidence, as measured by the National Association of Home Builders, to portend good news on earnings and sales.

D.R. Horton

Analysts on average predict that this builder will report that revenue for the fiscal third quarter rose almost 28 percent year-over-year to $2.08 billion. Earnings of $0.49 per share are also in the consensus forecast. That would be up from a reported profit of just $0.42 per share in the comparable period of last year.

Note that the consensus earnings per share (EPS) estimate has remained unchanged in the past 60 days, and the estimates range from $0.45 to $0.53. The company has not fallen short of analysts' EPS expectations in at least four quarters. The beat in the previous period was by almost 12 percent.

During the three months that ended in June, D.R. Horton acquired the homebuilding operations of Crown Communities. D.R. Horton has a market cap of less than $8 billion and a dividend yield near 0.6 percent. The price-to-earnings (P/E) ratio is less than the industry average.

The share price is up about 11 percent in the past 90 days, even after pulling back from a recent 52-week high. It remains above the 50-day moving average. The stock has outperformed competitors KB Home and PulteGroup over the past six months, but it has underperformed the S&P 500.

Meritage Homes

Per-share earnings from this builder are expected to have grown more than nine percent year-over-year to $0.82. Second-quarter revenue will total $513.90 million, which would be a gain of more than 14 percent, if analysts are correct.

Analysts have been wrong about Meritage in the past year, however, underestimating EPS in the first quarter by two cents, or about three percent. That miss was close to the mark; at least the three previous periods analysts missed by double-digit percentages. Analysts anticipate sequential and year-over-year growth on the top and bottom lines in the current quarter.

During its second quarter, Meritage Homes offered SunPower solar systems in select homes at no cost. It has a market cap of less than $2 billion and a long-term EPS growth forecast is about 14 percent. The P/E ratio is less than the industry average, but short interest is more than eight percent of the float.

The share price is down about 12 percent year-to-date. Shares have traded mostly between $40 and $50 since the beginning of 2013. The stock has underperformed not only the broader markets over the past six months, but also all of the homebuilders featured here as well.


Per-share earnings of $0.25 and revenue of $1.34 billion are anticipated from this builder when it shares its second quarter results Thursday morning. That would be up from $0.09 per share and $1.28 billion in sales in the same period of last year.

Here too, the consensus EPS is the same as it was 90 days ago, and individual estimates range from $0.21 to $0.29. The company missed expectations in the previous quarter by a penny per share, but earnings handily topped analysts' consensus estimates in the two periods before that.

During the three months that ended in June, Pulte declared a quarterly dividend and announced executive promotions. It has a market cap of more than $7 billion and a dividend yield near 1.0 percent. Its operating margin is less than the industry average, and the return on equity is more than 66 percent.

The share price has retreated more than four percent since the beginning of July, dropping below the 50-day moving average, but it is still up more than four percent in the past 90 days. The stock has underperformed the broader markets over the past six months, but it has outperformed KB Home and Meritage.

At the time of this writing, the author had no position in the mentioned equities.

More from Benzinga

Jul 24, 2014 11:39AM
Gee, I have to wonder how new homes sales plunging will inspire confidence...  still if MSDNC says it is so, it must be...  lol...
Jul 23, 2014 1:41PM
Look for some manipulated numbers to give the illusion all is well.  No different that what our gov does with the monthly jobs reports, consumer confidence index, etc.  All lies but soon the TRUTH will be told....
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
266 rated 2
485 rated 3
660 rated 4
586 rated 5
652 rated 6
640 rated 7
504 rated 8
289 rated 9
159 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.