Spotting Winners: D.R. Horton (NYSE:DHI) And Home Builders Stocks In Q3

December 23, 2024 at 04:02 AM EST

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Wrapping up Q3 earnings, we look at the numbers and key takeaways for the home builders stocks, including D.R. Horton (NYSE: DHI) and its peers.

Traditionally, homebuilders have built competitive advantages with economies of scale that lead to advantaged purchasing and brand recognition among consumers. Aesthetic trends have always been important in the space, but more recently, energy efficiency and conservation are driving innovation. However, these companies are still at the whim of the macro, specifically interest rates that heavily impact new and existing home sales. In fact, homebuilders are one of the most cyclical subsectors within industrials.

The 12 home builders stocks we track reported a mixed Q3. As a group, revenues beat analysts’ consensus estimates by 1.8% while next quarter’s revenue guidance was below.

Amidst this news, share prices of the companies have had a rough stretch. On average, they are down 13.2% since the latest earnings results.

D.R. Horton (NYSE: DHI)

One of the largest homebuilding companies in the U.S., D.R. Horton (NYSE: DHI) builds a variety of new construction homes across multiple markets.

D.R. Horton reported revenues of $10 billion, down 4.8% year on year. This print fell short of analysts’ expectations by 1.9%. Overall, it was a disappointing quarter for the company with full-year revenue guidance missing analysts’ expectations.

David Auld, Executive Chairman, said, “The D.R. Horton team produced a solid fiscal 2024, highlighted by consolidated pre-tax income of $6.3 billion on $36.8 billion of revenues and a pre-tax profit margin of 17.1%. Earnings per diluted share in fiscal 2024 increased 4% to $14.34. Our consolidated cash flow from operations for fiscal 2024 was $2.2 billion, and we returned all of the cash we generated this year to shareholders through share repurchases and dividends. Over the past five years, we generated $9.0 billion of cash flow from operations, and we reduced our outstanding share count by 12%.

D.R. Horton delivered the weakest performance against analyst estimates of the whole group. Unsurprisingly, the stock is down 21.5% since reporting and currently trades at $141.53.

Read our full report on D.R. Horton here, it’s free.

Best Q3: Skyline Champion (NYSE: SKY)

Founded in 1951, Skyline Champion (NYSE: SKY) is a manufacturer of modular homes and buildings in North America.

Skyline Champion reported revenues of $616.9 million, up 32.9% year on year, in line with analysts’ expectations. The business had an exceptional quarter with a solid beat of analysts’ sales volume estimates and an impressive beat of analysts’ EBITDA estimates.

The market seems happy with the results as the stock is up 5.3% since reporting. It currently trades at $95.77.

Is now the time to buy Skyline Champion? Access our full analysis of the earnings results here, it’s free.

Weakest Q3: Lennar (NYSE: LEN)

One of the largest homebuilders in America, Lennar (NYSE: LEN) is known for constructing affordable, move-up, and retirement homes across a range of markets and communities.

Lennar reported revenues of $9.95 billion, down 9.3% year on year, falling short of analysts’ expectations by 1.7%. It was a disappointing quarter as it posted a significant miss of analysts’ adjusted operating income estimates.

Lennar delivered the slowest revenue growth in the group. As expected, the stock is down 5.3% since the results and currently trades at $138.08.

Read our full analysis of Lennar’s results here.

Tri Pointe Homes (NYSE: TPH)

Established in 2009 in California, Tri Pointe Homes (NYSE: TPH) is a United States homebuilder recognized for its innovative and sustainable approach to creating premium, life-enhancing homes.

Tri Pointe Homes reported revenues of $1.14 billion, up 36.5% year on year. This print topped analysts’ expectations by 8.7%. It was a strong quarter as it also logged an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ EPS estimates.

Tri Pointe Homes pulled off the biggest analyst estimates beat and fastest revenue growth among its peers. The stock is down 12.9% since reporting and currently trades at $37.03.

Read our full, actionable report on Tri Pointe Homes here, it’s free.

KB Home (NYSE: KBH)

The first homebuilder to be listed on the NYSE, KB Home (NYSE: KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.

KB Home reported revenues of $1.75 billion, up 10.4% year on year. This result topped analysts’ expectations by 1.4%. More broadly, it was a softer quarter as it produced full-year revenue guidance missing analysts’ expectations.

KB Home had the weakest full-year guidance update among its peers. The stock is down 24.7% since reporting and currently trades at $65.86.

Read our full, actionable report on KB Home here, it’s free.

Market Update

Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.

Want to invest in winners with rock-solid fundamentals? Check out our 9 Best Market-Beating Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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