D.R. Horton Inc. (DHI): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
D.R. Horton's adjusted earnings of $0.45 per share in the fourth quarter of fiscal 2014 missed the Zacks Consensus Estimate by 8.2%. However, earnings increased 12.5% year over year as solid homebuilding revenues made up for the weak gross margins. Homebuilding revenues beat the consensus mark and increased 32.8% year over year backed by higher closings, improving order trends and pricing gains. Gross margin declined both year over year and sequentially due to higher incentives and unfavorable product mix. Despite the soft quarterly results, we have faith in the company's strong fundamentals which include its broad geographic footprint, product diversity and strong land position. Moreover, the recent order outperformance increases our confidence in the stock. We, therefore, have a Neutral recommendation on the stock.
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 2014, the company closed 28,670 homes at an average sales price (ASP) of $272,200.
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 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, Express Homes, Regent Homes, Crown Communities and Breland Homes.
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