On Monday, Dream Finders Homes Inc. (NYSE:DFH) shares maintained Neutral rating by BTIG, following a third-quarter earnings per share (EPS) that fell short of expectations. Dream Finders Homes reported a quarterly EPS of $0.70, which was below BTIG's estimate of $0.88 and the FactSet consensus of $0.84.
The underperformance was attributed to several factors, including lower than anticipated delivery volume, pricing, and gross margin, alongside a rise in selling, general and administrative expenses (SG&A) relative to sales.
The company's unit order growth matched BTIG's estimate at a 9% increase. Despite the current quarter's results, Dream Finders Homes reaffirmed its closing guidance for the full year 2024, aiming for 8,250 closings.
To achieve this target, the company will need to accelerate backlog conversion through the sale of finished and nearly finished speculative homes in the fourth quarter. This comes at a time when the environment is described as choppy, with higher interest rates posing additional challenges.
BTIG has adjusted its EPS forecasts for Dream Finders Homes, decreasing the 2024 estimate to $3.10 from $3.30 due to the recent quarter's shortfall. Similarly, the 2025 EPS estimate has been reduced to $3.35 from $3.50, taking into account a slightly slower sales pace and increased SG&A expenses anticipated for the next year.
Despite these revisions, BTIG notes that Dream Finders Homes still maintains a strong return on equity (ROE) in the high-20% range.
The analyst from BTIG concluded that while Dream Finders Homes is expected to continue seeking additional acquisition targets and prioritizing volume, the current share valuation is seen as fair. Thus, the firm has decided to maintain its Neutral stance on the stock.
In other recent news, Dream Finders Homes, Inc. has announced its definitive agreement to acquire Alliant National Title Insurance Company. This significant development is expected to considerably expand Dream Finders' operations in the title insurance sector.
Alliant National is known for its extensive network of over 700 independent agents across 32 states and the District of Columbia, making it the largest independent title underwriter in the nation without direct or affiliated operations.
The acquisition aligns with Dream Finders' strategy to vertically integrate its services and enhance its existing title insurance agency business. Both Patrick Zalupski, Dream Finders' Chairman and CEO, and David Sinclair, President & CEO of Alliant National, have expressed optimism about the partnership.
Subject to customary closing conditions, including the receipt of insurance regulatory approvals, the terms of the deal remain undisclosed. This acquisition highlights Dream Finders Homes' strategic expansion in the real estate services market.
InvestingPro Insights
Dream Finders Homes Inc. (NYSE:DFH) presents an intriguing investment case, as highlighted by recent InvestingPro data and tips. Despite the earnings miss reported in the article, the company's financials show some positive indicators.
The stock is currently trading at a P/E ratio of 10.16, which is relatively low compared to its near-term earnings growth potential. This is further supported by a PEG ratio of 0.62 for the last twelve months as of Q3 2024, suggesting the stock may be undervalued relative to its growth prospects.
InvestingPro Tips reveal that two analysts have revised their earnings upwards for the upcoming period, which could signal confidence in the company's future performance despite the recent earnings shortfall. Moreover, Dream Finders Homes has been profitable over the last twelve months, with a revenue of $4.03 billion and a healthy gross profit margin of 19.95%.
However, investors should note that the stock price movements are quite volatile, which aligns with the challenging environment described in the article. The company's year-to-date price total return stands at -13.45%, reflecting the current market conditions and higher interest rates mentioned.
For those considering a deeper analysis, InvestingPro offers 5 additional tips that could provide further insights into Dream Finders Homes' financial health and market position.
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