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D.R. Horton Q2 earnings: is the housing recession over?

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Shares of D.R. Horton Inc (NYSE: DHI) are up more than 5.0% this morning after the home construction company reported strong results for its second financial quarter.

Economist’s view on the housing market

More importantly, its guidance topped Street estimates as well.

D.R. Horton expected its revenue to fall between $31.5 billion and $33 billion this year. In comparison, analysts were at $28.4 billion. Still, PNC economist Abbey Omodunbi said today on Yahoo Finance Live:

We expect mortgage rates to remain elevated through 2023. Consumer is very concerned about economy, inflation, rates and we expect the downturn [in housing market] which started in fall of 2022 to continue through 2023.

Year-to-date, D.R. Horton stock is up more than 20% at writing.

Is D.R. Horton stock a buy now?

D. R. Horton reported a 43% year-over-year decline in its backlog to 19,237 homes, as per the earnings press release.

Those interested in buying D.R. Horton stock following the earnings report today should also know that a JPMorgan analyst downgraded this homebuilder to “neutral” last month.

Michael Rehaut agreed in a recent note that the home construction company has above-average fundamentals but said it’s already factored into its premium valuation. His $102 price target suggests about a 5.0% downside from here.

We anticipate some moderation in demand in coming months. We point to already strong decline in MBA Purchase Application Index – which should [make] investors more hesitant given the stock’s strength since June 2022.

Notable figures in D.R. Horton Q2

Net income printed at $942.2 million versus the year-ago $1.44 billion

Per-share earnings also declined significantly from $4.03 to $2.73

Revenue slid 0.3% on a year-over-year basis to $7.97 billion

FactSet consensus was $1.93 a share on $6.45 billion in revenue

Pre-tax profit margin narrowed sharply from 23.5% to 15.6%

Net sales orders and home sales gross margin tanked 5% and 7.3%

Also on Thursday, data from the National Association of Realtors confirmed that existing home sales declined 2.4% in March.

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