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D.R. Horton's (DHI) Q4 Earnings Miss Estimates, Grow 49% Y/Y

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D.R. Horton's (DHI) Q4 Earnings Miss Estimates, Grow 49% Y/Y

Continued strategic focus to consolidate market share, higher pre-tax margins and solid returns help D.R. Horton (DHI) deliver higher fiscal Q4 numbers.

D.R. Horton, Inc. DHI ended fiscal 2018 with impressive fourth quarter of fiscal 2018 results, courtesy of continued strategic focus to consolidate market share, while generating strong cash flows, pre-tax income and returns. Notably, it completed its 17th consecutive year as the largest homebuilder in the United States, with home closing of 51,857 in fiscal 2018. Shares of the homebuilder increased 0.3% in the pre-market trading session following the earnings release.

The company’s earnings came in at $1.22 per share in the quarter, missing the Zacks Consensus Estimate by a penny. Nevertheless, the reported figure surged 49% from the year-ago profit level of 82 cents. It remains focused to consistently grow its top line and pre-tax profits at a double-digit pace annually, while generating higher annual operating cash flows and returns.

Revenue Discussion

Total revenues (Homebuilding, Forestar and Financial Services) came in at $4.51 billion, up 8.3% year over year. However, the reported figure missed the Zacks Consensus Estimate of $4.59 billion. Indeed, higher prices of both new and existing homes across most of the markets served by the company, coupled with rising interest rates impacted affordability and resulted in some moderation in the demand for homes.


D.R. Horton, Inc. Price, Consensus and EPS Surprise


D.R. Horton, Inc. Price, Consensus and EPS Surprise | D.R. Horton, Inc. Quote

Home Closings and Orders

Homebuilding revenues of $4.39 billion increased 8% from the prior-year quarter. Home sales increased 8.5% year over year to $4.38 billion, aided by higher home deliveries. Land/lot sales and other revenues were $12.7 million, down from $31.4 million a year ago.

Home closings increased 11% to 14,674 homes and 9% to $4.4 billion in value. It recorded growth across all regions (barring West) comprising East, Midwest, Southeast, South Central and Southwest.

Net sales orders increased 11% to 11,509 homes on continued improvement. Orders increased across all operating regions, except Southwest and West regions. Value of net orders grew 10% to $3.4 billion. The cancellation rate was 26%, up from 25%% in the prior-year quarter.

Quarter-end sales order backlog (under contract) increased 8% to 13,371 homes. Backlog value increased 8% to $4 billion.

Revenues at the Financial Services segment increased 10.4% to $102.2 million. Forestar contributed $32.2 million to its quarterly revenues.


The company’s consolidated pre-tax margin expanded 180 basis points (bps) to 13.5% in the quarter.

Fiscal 2018 Highlights

Total revenues (homebuilding, Forestar and financial services) of $16.1 billion increased from the year-ago level of $14.1 billion. Earnings came in at $3.81 per share, up 41% year over year.

Pre-tax income increased 29% to $2.1 billion and pre-tax margin improved 140 bps to 12.8%. The company’s homebuilding return on inventory improved 360 bps from a year ago to 20.2%. Its homebuilding cash flow from operations was $1 billion in fiscal 2018.

Balance Sheet

D.R. Horton’s cash, cash equivalents and restricted cash totaled $1,506 million as of Sep 30, 2018 compared with $1,007.8 million on Sep 30, 2017.

Zacks Rank

Currently, D.R. Horton carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Peer Releases

PulteGroup Inc. PHM reported impressive third-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate. Moreover, the company’s top and bottom lines grew considerably, courtesy of higher revenues and margin improvement.

KB Home’s KBH third-quarter fiscal 2018 earnings of 87 cents per share outpaced the Zacks Consensus Estimate of 78 cents by 11.5% and also increased 71% from 51 cents a year ago. Total revenues of $1.22 billion, however, missed the consensus mark of $1.27 million. Nevertheless, the top line improved 7.1% year over year on higher housing revenues.

NVR, Inc. NVR reported third-quarter 2018 earnings of $48.28 per share, beating the Zacks Consensus Estimate of $47.64 by 1.3%. Also, earnings increased 27% from the prior-year quarter, primarily owing to reduction in effective tax rate.

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