D.R. Horton (DHI) is partially shielded from rising construction costs because it has multi-year contracts, Oppenheimer said in a note on Friday.
Clients have expressed concerns about mounting stick and brick costs in the ongoing inflationary environment, according to the brokerage.
"We note that (D.R. Horton) has multi-year contracts for many of its products," Oppenheimer analyst Tyler Batory said. "This provides it some protection in an inflationary backdrop."
The homebuilder's size gives it a competitive advantage over smaller players, Batory said.
"We continue to think the company can largely offset lot cost inflation with lower stick and brick costs," Batory said.
D.R. Horton has relations with land developers and partners, as well as balance sheet strength that helps it source and develop lots.
"These advantages remain particularly important as smaller builders face greater capital constraints and more limited land access," Batory said.
The company's fiscal second-quarter results came in better than expected in April, although it tempered its full-year revenue outlook at the time.
D.R. Horton's stock is up about 7% this year through Friday close.
Price: $154.15, Change: $-0.28, Percent Change: -0.18%
