Shares of D.R. Horton were upgraded to buy from hold by TheStreet Ratings on Monday.
"DHI expects mid-16% gross margins in 2012 to persist until the fundamentals of job and home prices drive margins higher," KeyBanc Capital Markets analysts wrote in a Jan. 30 report. "DHI remains very active blending in new lots, with its 22,000 owned finished lots (23,000 finished optioned), 21,000 partially finished and 43,000 mothballed units, awaiting the housing recovery. DHI expects to develop 27,000 lots over the next 12-18 months, implying 6,000 incremental lots from options that will be developed."
D.R. Horton has an estimated price-to-earnings ratio for next year of 17.24 times; the average for home construction companies is 20.66. For comparison, both Lennar (LEN) and Toll Brothers (TOL) have higher forward P/Es of 17.8 and 31.9, respectively.Fifteen of the 22 analysts who cover D.R. Horton rated it hold. Five analysts gave the stock a buy rating and two rated it sell. TheStreet Ratings gives D.R. Horton a B- grade and a $17.33 price target. The stock closed Friday at $13.93 and has risen 10.47% year to date.
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