Shares of D.R. Horton (DHI) and PulteGroup (PHM), the nation's two largest homebuilders, fell sharply Thursday after they reported mixed results for their June-ended quarters.
D.R. Horton closed down nearly 9% and PulteGroup more than 10%. D.R. Horton missed analysts' revenue estimates, but at 42 cents a share beat profit views by 7 cents. Homebuilding revenue rose at a relatively healthy clip, 47.3% over last year's same period to $1.64 billion. Analysts had expected $1.7 billion.
Fort Worth, Texas-based Horton said its average sales price rose 15% to $268,000, with "pricing power" across most of its markets. Management noted increased demand from move-up buyers.
Orders, a precursor to future sales, grew 12% to 6,822 homes.
The cancellation rate came in at 24%, up from 19% the prior quarter.
"We experienced some moderation in our net sales pace in the back half of the quarter after mortgage rates began to increase sharply," D.R. Horton CFO Bill Wheat said on the company's conference call with analysts.
PulteGroup's orders fell 12% to 4,885 homes as its community count declined 16% from a year earlier as strong sales ate into inventory.
Pulte, which plans to move its headquarters to Atlanta from the Detroit suburbs, missed analysts' profit estimates by 4 cents a share. Excluding 17 cents in charges, it earned 26 cents a share vs. analysts' average estimate of 30 cents as tallied by Thomson Reuters. It earned 11 cents in last year's same quarter.
Pulte's homebuilding revenue climbed 19% to $1.2 billion as average selling prices rose 9% to $294,000.
"Even the recent rise in interest rates has had little effect on overall activity," Pulte CEO Richard Dugas said, noting "consumers are continuing to exhibit a sense of urgency in their desire to purchase a new home.
Homebuilder stocks have been hammered lately as mortgage rates have risen and earnings growth has slowed from prior quarters.
Smaller builder MI Homes (MHO) fell 7% Thursday after it reported earnings of 25 cents a share, up from last year's 17 cents, including asset impairments in both periods. Homebuilding revenue rose 37% to $227.3 million.
The Columbus, Ohio-based builder said June-quarter orders jumped 31% from last year to 1,078 homes.
MI Homes CEO Robert Schottenstein said MI's community count grew 13% and its average sales price rose 7% from a year earlier, resulting in the company's highest quarter-end backlog and sales value in over 5 years.
"Our recent expansion into Texas continues to positively impact our results, as new contracts in Texas almost doubled when compared to last year's second quarter and first half," he said.