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Why D.R. Horton (DHI) Stock Is Up In Pre-Market Trading Today

Stocks in this article: DHI UBS

NEW YORK (TheStreet) -- Shares of D.R. Horton, Inc.  (DHI) are higher in pre-market trading by 1.19% to $21.34 Thursday after the homebuilding company was upgraded to "buy" from "neutral" at UBS (UBS)  , with an increased price target to $26 from $20.

Analysts at the firm cited relative valuation and said investor concerns about deteriorating performance is an overreaction.

UBS also said D.R. Horton is well positioned for 2015 given its decision to accelerate construction, reduce costs, and focus on the return of the entry level buyer and potential higher rates. 

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Separately, TheStreet Ratings team rates D R HORTON INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate D R HORTON INC (DHI) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 5.5%. Since the same quarter one year prior, revenues rose by 26.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.69, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • D R HORTON INC's earnings per share declined by 23.8% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, D R HORTON INC reported lower earnings of $1.34 versus $2.74 in the prior year. This year, the market expects an improvement in earnings ($1.54 versus $1.34).
  • You can view the full analysis from the report here: DHI Ratings Report

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