Why D.R. Horton (DHI) Stock Is Climbing Today

NEW YORK (TheStreet) -- D.R. Horton (DHI) shares are rising, up 1.3% to $22.91, on Tuesday after analysts at Sterne Agee raised the company's earnings estimates citing a recent acquisition as a reason for the optimism.

D.R. Horton acquired the home building arm of Crown Communities for $210 million on Friday. During fiscal year 2013 Crown reported revenue of $375 million.

Sterne Agee believes that the acquisition will increase the company's presence in the Atlanta region where Crown Communities is based.

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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, attractive valuation levels, growth in earnings per share, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • DHI's revenue growth has slightly outpaced the industry average of 19.0%. Since the same quarter one year prior, revenues rose by 21.1%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • D R HORTON INC has improved earnings per share by 18.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in 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 ($1.72 versus $1.34).
  • The net income growth from the same quarter one year ago has exceeded that of the Household Durables industry average, but is less than that of the S&P 500. The net income increased by 17.9% when compared to the same quarter one year prior, going from $111.00 million to $130.90 million.
  • DHI's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
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