It's said "home is where the heart is," but home is also where the profits are given the more than 17% three-month rise in the SPDR S&P Homebuilders ETF (XHB). During that span, D.R. Horton Inc. (DHI), one of the nation's largest homebuilders, has seen its stock rise almost 18%. But ahead of the company's second quarter fiscal 2016 earnings results Thursday, should investors expect that more gains are on the way?

Expectations for the Quarter

For the quarter that ended March, the average analyst earnings-per-share estimate calls for 47 cents per share on revenue of $2.69 billion, translating to year-over-year growth of 17.5% and 15.8%, respectively. For the full year, ending September, earnings are projected to rise 16% year-over-year to $2.32 per share, while revenue of $12.19 billion would mark an increase of 16.5%. (For more, see: Why DR Horton Looks Inviting Ahead of Earnings.)

Based on the implied strength in these estimates, it would seem fears about weaker than expected construction spending have been exaggerated. The fact that both earnings and revenue are projected to climb to high double digit rates implies not only that DR Horton has significant pricing power, but the company, which has beaten Wall Street's earnings estimates in five straight quarters, is benefiting from its strategy of selling high-priced homes. 

What's more, DR Horton, which continues to grow its profit margins (up 40 basis points in the first quarter), doesn't have to rely solely on high sales to put up good numbers. The benefit of high sales is still a bonus, however. In its first quarter, DR Horton reported a backlog of 10,665 homes, marking a 15% rise year-over-year. In dollar value terms, this backlog comes to $3.2 billion, up 16%.

These figures mean the company already has $3.2 billion worth of revenue it can count on. That's more than a quarter of its total projected full-year revenue of $12.19 billion. This indicates there's a strong pent up demand for DR Horton-built homes, which will likely translate to a higher stock price in the quarters ahead. (For related reading, see: Public Homebuilding Companies Poised For Gains.)

The Bottom Line

DR Horton shares closed Tuesday at $31.28, down 0.38%. Even with the stock's recent rally, DR Horton shares are still attractively priced at just 13 times fiscal 2016 estimates of $2.32 per share compared to a 17 P/E for the S&P 500 index. Assuming DR Horton stock was priced on par with the rest of the market, it would be valued today at around $39 or about 24% higher.

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