Are you ready to build out your portfolio with a hidden housing pick for 2024? D.R. Horton (NYSE:DHI) stock isn’t talked about enough in the financial press and social media, in my opinion. Dividend collectors, value hunters, and growth investors all have good reasons to conduct their due diligence on D.R. Horton, even if they’ve never heard of the company before. When all is said and done, I am bullish on DHR stock, and it’s one of my favorite hidden picks of the year.
Based in Texas, D.R. Horton is one of America’s largest home builders. If you’re in the U.S., you might live in a home built by D.R. Horton and not even know it.
As we’ll discuss in a moment, the current market environment isn’t an easy one for American home builders like D.R. Horton. Nonetheless, the firm appears to be weathering the economic storm and even delivered a quarterly beat-and-raise combo that should impress any skeptical investor.
D.R. Horton Faces Tough Housing Conditions
Not long ago, Federal Reserve Chairman Jerome Powell indicated that U.S. interest rates will probably be higher for longer than some people had anticipated. Bond yields jumped higher, and the 30-year mortgage interest rate hovered near 7%. All of this tends to discourage home-buying activity, which could be bad news for D.R. Horton.
Furthermore, a couple of days ago, the Census Bureau released an unfavorable data print. Specifically, U.S. housing starts for March came in at a seasonally adjusted annual rate of 1.47 million. That’s down 14.7% from February’s housing starts reading. Meanwhile, the analyst consensus estimate had called for housing starts to increase by 2.4%, not decrease by 14.7%.
Now, we can see why DHR stock fell 2% on Wednesday, April 16, after the publication of the March housing starts data. Other homebuilder stocks, such as Lennar (NYSE:LEN) stock, also fell on that day.
On the other hand, D.R. Horton is rebounding nicely today and, despite higher-for-longer interest rates, has been on a general uptrend for the past two years. I’d say this is because D.R. Horton is a solid business that’s growing in the most important ways. But don’t just take my word for it, as the numbers will support my bullish stance in a moment.
D.R. Horton: Growth, Value, and More
First of all, D.R. Horton demonstrated growth in the second quarter of Fiscal Year 2024 and expects more growth throughout the full year. Judging by D.R. Horton’s results and guidance, you might not even think that housing conditions are tough right now (even though they actually are).
There’s so much good news from D.R. Horton’s second quarter that it’s hard to know where to start. The company’s homes closed increased 15% year-over-year to 22,548 homes and also grew 14% in value to $8.5 billion. Moreover, D.R. Horton’s consolidated revenue increased 14% to $9.1 billion, beating Wall Street’s consensus estimate of $8.15 billion in quarterly revenue.
Turning to the bottom-line results, D.R. Horton reported earnings of $3.52 per share in Q2 of FY2024, easily surpassing the analysts’ consensus call for earnings of $3.07 per share. Chairman Donald R. Horton acknowledged that “inflation and mortgage interest rates remain elevated” but considers D.R. Horton to be “well-positioned.”
Given the aforementioned quarterly data points, it’s hard to disagree with Horton’s optimism. Speaking of optimism, D.R. Horton raised its full-year FY2024 revenue guidance from $36 billion-$37.3 billion previously to $36.7 billion-$37.7 billion currently. Hence, the company clearly expects to remain “well-positioned” throughout the year despite “elevated” inflation and interest rates.
Despite all the great news, D.R. Horton isn’t overvalued at all. Adding up the company’s quarterly EPS results from the past year ($3.90, $4.45, $2.82, and $3.52) and assuming a share price of $151, we can calculate D.R. Horton’s trailing 12-month P/E ratio as 10.28x. Meanwhile, the sector median non-GAAP P/E ratio is higher than that, at 18.32x.
Finally, I should mention that D.R. Horton declared a quarterly dividend of $0.30 per share. If the company maintains its dividend, then $0.30 per quarter could be annualized to $1.20 per year. Assuming a share price of $151, this would be a forward annual dividend yield of 0.8% — not spectacular, but a nice little bonus for passive-income investors.
Is D.R. Horton Stock a Buy, According to Analysts?
On TipRanks, DHR comes in as a Moderate Buy based on nine Buys, three Holds, and two Sell ratings assigned by analysts in the past three months. The average D.R. Horton stock price target is $167.09, implying 11.1% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell DHR stock, the most profitable analyst covering the stock (on a one-year timeframe) is Stephen Kim of Evercore ISI, with an average return of 34.97% per rating and an 87% success rate. Click on the image below to learn more.
Conclusion: Should You Consider D.R. Horton Stock?
There are so many reasons to consider D.R. Horton now that it’s hard to list them all in one place. The company pays a dividend, isn’t overvalued at all, and just served up an impressive beat-and-raise combination despite challenging housing conditions. Therefore, I am certainly considering DHR stock today and believe that all investors should take a closer look at the surprisingly resilient housing giant, D.R. Horton.
