D.R. Horton Inc. (DHI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
D.R. Horton's adjusted earnings of $0.32 per share in the third quarter of 2014 missed the Zacks Consensus Estimate by 34.7% and declined 23.8% year over year. Higher incentives, reduced gross margins, higher SG&A ratio and massive inventory/land impairment charges in the Chicago market hurt quarterly earnings. In an effort to improve the sales pace in the quarter, management increased incentives. Though the strategy improved order trends in the quarter, it took a toll on gross margins. Despite the poor quarterly results, we have faith in the company's strong fundamentals which include its broad geographic footprint, product diversity and strong land position. We, therefore, have a Neutral recommendation on the stock

Overview:

D.R. Horton Inc., based in Texas, is one of the leading national homebuilders, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets. Homes vary in sizes from 1,000 to 4,000 square feet, with prices ranging from $100,000 to more than $1,000,000. In fiscal 2013, the company closed 24,155 homes at an average sales price (ASP) of $249,400.

D.R. Horton operates through two segments: Homebuilding and Financial Services. The Homebuilding segment comprises six reporting regions and derives revenues primarily from the sale of completed homes built on either its self-constructed or acquired lands. In addition to single-family detached homes, the segment builds attached homes, such as town homes, duplexes, triplexes and condominiums. The segment also derives revenues by selling lands and lots. The segment recorded revenues of $6.3 billion in fiscal 2013, accounting for 97% of the company's revenues.

The Financial Services segment, through the mortgage subsidiary, DHI Mortgage, derives its income from originating and selling mortgages and collecting fees for title insurance and closing services.

D.R. Horton's operations are spread over 79 metropolitan markets in 27 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the U.S. D.R. Horton's houses are sold under the brand names D.R. Horton - America's Builder, Emerald Homes, Regent Homes and Breland Homes. In early fiscal 2014, the company introduced a new brand, Express Homes, in the $120,000 $150,000 range, targeted at entry level buyers, who focus on affordability.

The company acquired the homebuilding operations of Breland Homes in Huntsville, AL in Aug 2012, Regent Homes in Oct 2013, an entry-level builder in the Carolinas, and Crown Communities in May 2014, Atlanta's largest builder.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: ASP , DHI

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