D.R. Horton, Inc.
) reported dismal fourth-quarter fiscal 2013 results missing the
Zacks Consensus Estimate for both revenues and earnings as
Adjusted earnings of 40 cents per share in the fourth quarter
of fiscal 2013 missed the Zacks Consensus Estimate of 41 cents by
a penny due to lower-than-expected top-line performance. Earnings
grew 33.3% year over year driven by margin expansion.
Homebuilding revenues of $1.82 billion climbed 40% year over
year but missed the Zacks Consensus Estimate of $1.839 billion by
6.3% due to net order decline.
Revenues Were Soft
Home sales increased 40.0% year over year to $1.80 billion due
to pricing gains. Land sales contributed $15.8 million to
revenues, higher than $10.5 million in the prior-year
Net sales orders declined 2% in the fourth quarter to 5,160
homes as housing demand slowed. The net order growth was much
lower than 12%, 34% and 39% reported in the third, second and
first quarters, respectively. The cancellation rate stood at 31%,
significantly higher than 24% in the third quarter and 19% in the
second. The value of net orders grew 14% to $1.4 billion.
We believe that the recent increase in interest/mortgage rates
has slowed order pace and traffic. With the recent improvement in
economic conditions and the housing market in general, mortgage
rates are edging upwards to more normalized levels since May.
High interest rates dilute the demand for new homes, as
mortgage loans become expensive; thus lowering a buyer's
purchasing power. We believe that the sharp increase in interest
rates shocked many customers and a few put off their purchase
decision; thus increasing cancellation rates and lowering
Orders declined in the West, Midwest and Southwest segments
while growing in East, Southeast and South Central regions.
Home closings were up 23.0% to 6,866 homes in the reported
quarter compared with 5,575 homes in the year-ago quarter. The
upside was driven by growth in all the regions, except the
The quarter-end sales order backlog rose 13% to 8,205 homes.
Backlog value grew 33% to $2.2 billion. Sales order backlog
represents homes under contract but not yet closed at the end of
a certain period.
Gross profit on home sales was $394.8 million, up around 70.0%
year over year. Gross margin on home sales expanded 380 basis
points (bps) year over year to 21.9%, higher than company
expectations of 21% due to pricing gains.
Selling, general and administrative (SG&A) expenses were
$186.6 million, up 28.0% from the prior-year quarter. However,
SG&A expenses as a percentage of homebuilding revenues
improved 90 bps to 10.3%, in line with expectations as the
company leveraged its fixed cost structure. Sequentially, the
SG&A ratio improved 10 bps.
Consolidated pre-tax income was $202.8 million in the quarter,
up 104% year over year. Consolidated pre-tax margins stood at
10.9%, reflecting an improvement of 350 bps year over year.
Pre-tax margin, however, declined sequentially perhaps due to
soft financial services profits.
Homebuilding pre-tax income was $189.4 million versus $85.7
million in the prior-year quarter. Pre-tax income from financial
services came in at $13.4 million, flat year over year.
In fiscal 2013, the company witnessed a 44% increase in
revenues to $6.1 billion, missing the Zacks Consensus Estimate of
Adjusted earnings were $1.33 per share, which beat the Zacks
Consensus Estimate of $1.31 by 1.5%. Earnings grew 70.5% from the
Other Stocks to Consider
D.R. Horton carries a Zacks Rank #3 (Hold). Better-placed
stocks in the homebuilding sector include
M/I Homes, Inc.
). While M/I Homes carries a Zacks Rank #1 (Strong Buy), KB Home
and Meritage Homes carry a Zacks Rank #2 (Buy).
D R HORTON INC (DHI): Free Stock Analysis
KB HOME (KBH): Free Stock Analysis Report
M/I HOMES INC (MHO): Free Stock Analysis
MERITAGE HOMES (MTH): Free Stock Analysis
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