We just heard from the largest homebuilder in the United States, D.R. Horton $DHI.
They missed top and bottom-line expectations, but the market reacted positively.
Price rallied 3.16% with a sweet reaction score of 1.73. It was the best earnings reaction on Friday.
Paul Romanowski, the CEO, said the following about the quarter:
"Although inflation and mortgage interest rates remain elevated, our net sales orders increased 46% for the first quarter and 14% from the prior year quarter as the supply of both new and existing homes at affordable price points is still limited, and the demographics supporting housing demand remained favorable."
This is drastically different than the prevailing narrative about the company.
Many on Wall Street have gotten overly bearish on the homebuilding industry, and we think the stocks are sold out over the short term.
Let's talk about what else happened with their reports.
Here are the latest earnings reports from the S&P 500 👇
*Click the image to enlarge it
D.R. Horton $DHI had the best reaction score and reported a double miss.
The company reported revenues of $7.73B, versus the $8.03B estimate, and earnings per share of $2.58, versus the $2.63 estimate.
UnitedHealth Group $UNH had the worst reaction score and reported a double miss.
The company reported revenues of $109.58B, versus the $111.58B estimate, and earnings per share of $7.20, versus the $7.29 estimate.
Now let's dive into the data and talk about what happened with these reports 👇
DHI rallied after a bad earnings report:
D.R. Horton rallied 3.2% after this earnings report, and here's why:
They sold 22,548 homes, which is a 15% quarter-over-quarter increase.
Gross margin increased by 30 basis points Q/Q.
Increased 2025 guidance across the board.
The market seems to have gotten too bearish on the fundamental story here.
And nothing makes this more clear than when the stock rallied after a double miss.
The price has found support at the 61.8% retracement of the prior uptrend. We expect this level to hold.
We expect DHI to churn sideways between 113 and 132 for the foreseeable future.
UNH had its worst earnings reaction this century:
UnitedHealth Group fell 22.4% after this earnings report, and here's why:
They revised their 2025 guidance lower across the board.
Medicare Advantage costs are much higher than initially anticipated.
The medical care ratio (a measure of how much premium is being spent) increased by 50 basis points.
The company isn't doing very well, and the stock price is reflecting that.
Price is hanging on for dear life at a key level of interest. Things will likely worsen if the bears take control and resolve this distribution pattern.
If UNH is below 461.50, the path of least resistance will shift from sideways to lower.
Thank you for reading.
- The Beat Report Team
PS: Volatility’s still elevated — and Steve’s using it to his advantage, looking for trades that double while the market is pricing in huge swings. You can watch Friday's replay here, where Steve walked through all of the opportunities he's seeing right now.
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