D. R. Horton (NYSE:DHI) is a Zacks Rank #5 (Strong Sell) despite beating the bottom line estimate when the company last reported earnings back in late April. Since then, the stock has been all over the place. Let's look at why this stock is a Zacks Rank #5 (Strong Sell) in this Bear of the Day article.
Description
D.R. Horton, Inc. operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States. It engages in the acquisition and development of land; and construction and sale of residential homes in 31 states and 98 markets under the names of D.R. Horton, America's Builder, Express Homes, Emerald Homes, and Freedom Homes. It primarily serves homebuyers. D.R. Horton, Inc. was founded in 1978 and is headquartered in Arlington, Texas.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market's expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of DHI, I see four straight beats of the Zacks Consensus Estimate. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn't make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
Earnings Estimates
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For DHII see annual estimates moving lower.
The current year 2022 consensus number has dropped from $17.33 to $17.07 over the last 30 days.
The next year has dropped from $17.54 to $15.81 over the same time period.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a majority of stocks in the Zacks universe are seeing negative earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
D.R. Horton, Inc. (NYSE: DHI): Free Stock Analysis Report
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