D.R. Horton Inc 's ( DHI ) adjusted net
earnings of 32 cents per share in the second quarter of fiscal 2013
handsomely beat the Zacks Consensus Estimate of 20 cents by 60% and
the year-ago earnings of 13 cents by 146.2%. The earnings upsurge
was driven by both sales and margin improvement in the Homebuilding
and Financial Services segments.
Total revenues of $1.80 billion surpassed the Zacks Consensus
Estimate of $1.23 billion by 46.3%. Reported revenues climbed 50.0%
year over year, driven by better pricing power and volume growth
amid improved market conditions. All the operating regions of the
company reported strong sales growth.
Quarter in Detail
Homebuilding revenues of $1.39 billion climbed 48.7% year over
year, on the back of strong home sales. Home sales increased 47.3%
year over year to $1.37 billion driven by strong growth in net
sales orders and selling prices as the company witnessed
broad-based improvement across all markets.
On the other hand, land sales contributed $21.7 million to
revenues, much higher than $5.0 million in the prior-year quarter
owing to frequent land purchases made by the company.
Net sales orders in the second quarter totaled 7,879 homes, up
34% from the prior-year quarter, bolstered by the increased demand
during the spring selling season. The value of net orders grew 52%
to $2.0 billion driven by increased volumes and average sales
Home closings were up 33.0% to 5,643 homes in the reported
quarter compared with 4,240 homes in the year-ago quarter.
The quarter-end sales order backlog rose 54% to 9,553 homes from
6,189 homes at the end of the second quarter of fiscal 2012. The
backlog grew 76% amounting to $2.4 billion. Sales order backlog
represents homes under contract but not yet closed at the end of a
Gross profit on home sales was $278.8 million, up 70.6% year
over year. Selling, general & administrative (SG&A)
expenses were $155.1 million, up 21.6% from the prior-year
Consolidated pre-tax income was $142.1 million in the quarter,
up 236% year over year. Consolidated pre-tax margins stood at 9.9%,
reflecting an improvement of 550 basis points year over year,
driven by significant improvement in both the segments. Improved
market conditions, strategic initiatives resulting in improved
profitability, and efficient inventory management boosted pre-tax
Fiscal 2013 Outlook
If market conditions remain stable, management expects the
company's profitability to increase in 2013 and thereafter. With
increase in demand for new homes, the company has been able to
increase prices and create a robust inventory. The company had
15,800 homes and 175,000 finished land lots in its inventory at the
end of the second quarter of 2013, which position it well to
capitalize on the increased demand.
D. R. Horton currently carries a Zacks Rank #1 (Strong
Other stocks in the homebuilding sector that are performing well
and deserve a mention include PulteGroup Inc. ( PHM ), Ryland
Group Inc. ( RYL ) and KB
Home ( KBH
). While Ryland carry a Zacks Rank #1 (Strong Buy), PulteGroup and
KB Home carry a Zacks Rank #2 (Buy).D R HORTON INC (DHI): Free Stock Analysis
ReportKB HOME (KBH): Free Stock Analysis ReportPULTE GROUP ONC (PHM): Free Stock Analysis
ReportRYLAND GRP INC (RYL): Free Stock Analysis
ReportTo read this article on Zacks.com click here.