Don't Be Fooled by D.R. Horton Earnings

FORT WORTH, Texas (TheStreet) -- The Street is projecting expected earnings tomorrow from homebuilder D.R. Horton(DHI Quote) of -$0.41 per share, but putting the crystal ball to the negative earnings number may be less important than some of the underlying indicators released by the homebuilder.

As went the homebuilding industry went D.R. Horton in recent history. The stock has a return on equity (trailing 12 months) of -36.18% and earnings per share ratio (trailing 12 months) of -3.52%. It was down in trading by 0.97% today, closing at $12.25, much closer to its 52-week high of $13.90 than its low of $3.79 -- though many of the big homebuilders experienced larger dips in share price today.

Indeed, it's hard to talk about financial health in homebuilder stocks when the day's bad news included worsening mortgage delinquencies, on top of the negative housing starts and permit data from Wednesday. But homebuilder analysts do see a silver lining in the sector's outlook -- and in particular, the earnings to be reported tomorrow by D. R. Horton.

Likewise, if there is a silver lining in mortgage foreclosures moving up sequentially between quarters, it was that it was by a smaller percentage in the two most recent quarters than it had been previously. Furthermore, even with rising foreclosures, builders have been able for two quarters now to increase orders year over year and raise prices.

"We've whittled down inventory to a low level so that natural demand is starting to come through," James McCanless, analyst at FTN Equity Capital said.