Home builder stocks rose on Monday ahead of a first-quarter earnings report from the nation’s largest builder
D.R. Horton
before the market opens on Tuesday.
Analysts expect D.R. Horton will post earnings of $2.87 a share on $7.55 billion in revenue in its fiscal first quarter ended Dec. 31, up from $2.76 a share on $7.3 billion in revenue in the first quarter of 2023.
D.R. Horton is likely to offer insight on the year ahead. The builder said in early November that it expected to close homes in a range from 86,000 to 89,000 in 2024. The builder records revenue when homes are closed, or delivered to customers.
Wells Fargo
analysts Sam Reid and Zachary Fadem wrote in a Monday note that D.R. Horton could raise its outlook on deliveries. The analysts expect 88,300 deliveries in 2024, above Wall Street’s consensus call for 88,100, according to the note.
Mortgage rates began to fall in November, ultimately dropping more than a percentage point. That pullback ignited an end-of-year builder rally. D.R. Horton shares gained 70.5% in 2023. But if it beats expectations on orders, that could send shares higher, Wells Fargo said, adding that margins could be stronger than expected.
A rally in D.R. Horton shares since its last earnings report “undoubtedly made this one tougher for us to get bullish on into FQ1,” the analysts wrote. The stock is up 3.1% so far this year.
In a recent interview with Barron’s, Douglas Yearley, CEO of builder
Toll Brothers,
said limited inventory of existing homes for sale, and demand from millennials seeking their first home and baby boomers looking for active adult communities, will boost builders’ business.
Sales of new homes in 2023 grew as the market for previously owned homes slowed significantly. There were 4.09 million existing homes sold last year, the National Association of Realtors said last week, the lowest total in nearly 30 years. New home sales, meanwhile, were up roughly 4% from the year prior in the 11 months of 2023 for which data is available.
New home sales sagged in November as mortgage rates rose, but economists expect better sales in December. Consensus estimates compiled by FactSet foresee new home sales rising to a seasonally adjusted annual rate of 647,500 in December. The data, which is based on contract signings, will be released on Thursday at 10 a.m.
Builder stocks were broadly higher on Monday. The
iShares U.S. Home Construction
exchange-traded fund, which tracks builders and related industries, was up 1.5%. The gains accompanied a drop in the 10-year Treasury yield, which was down 0.04 percentage point to a yield of 4.1%. Lower Treasury yields often result in lower mortgage rates, one of the key inputs of housing costs.
Write to Shaina Mishkin at [email protected]
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