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D.R. Horton (DHI) Q3 Earnings Top, Margin Up, Shares Down

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·5 min read
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D.R. Horton, Inc. DHI reported impressive results for third-quarter fiscal 2021. Both the top and bottom lines topped the Zacks Consensus Estimate and improved significantly on a year-over-year basis.

However, shares of the company declined 4.8% in the pre-market trading session on Jul 22. Investors’ sentiments might have been hurt by tepid net sales orders across the regions served.

Donald R. Horton, Chairman of the Board, said, "Housing market conditions remain very robust, with homebuyer demand exceeding our current capacity to deliver homes across all of our markets. As our top priority is to consistently fulfill our commitments to our homebuyers, we have slowed our home sales pace to more closely align to our current production levels, while building out the infrastructure needed to support a higher level of home starts. We are also selling homes later in the construction cycle when we can better ensure the certainty of the home close date for our homebuyers.”

Earnings & Revenue Discussion

The company reported adjusted earnings of $3.06 per share for the quarter, surpassing the Zacks Consensus Estimate of $2.83 by 8.1% and increasing a whopping 78% from the year-ago period.

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

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

D.R. Horton, Inc. price-consensus-eps-surprise-chart | D.R. Horton, Inc. Quote

Total revenues (Homebuilding, Forestar and Financial Services) came in at $7.28 billion, up 35% year over year. Also, the reported figure surpassed the consensus mark of $7.18 billion by 1.3%.

Home Closings & Orders

Homebuilding revenues of $7.1 billion increased 35% from the prior-year quarter. Home sales also increased 35.1% year over year to $7.04 billion, aided by higher home deliveries. Land/lot sales and other revenues were $55.8 million, up 116.3% from a year ago.

Home closings increased 22% from the prior-year quarter to 21,588 homes and 35% in value to $7 billion. It recorded growth across the regions served, comprising East, Midwest, Southeast, West, South Central and Southwest.

Net sales orders, however, fell 17% year over year to 17,952 homes. Nonetheless, value of net orders improved 2% year over year to $6.4 billion. Cancellation rate was 17%, lower than 22% reported in the prior-year quarter.

Order backlog of homes at quarter-end was 32,209 homes, up 39% year over year. Value of the backlog was also up 57% from the prior year to $11 billion.

Financial Services’ revenues increased 20% from the year-ago level to $188.7 million.

Forestar contributed $312.9 million to its total quarterly revenues, reflecting a notable improvement from $177.9 million a year ago.


The company’s consolidated pre-tax margin expanded 490 basis points to 19.4% for the quarter.

Balance Sheet Details

D.R. Horton’s cash, cash equivalents and restricted cash totaled $1.97 billion as of Jun 30, 2021 compared with $3.04 billion at fiscal 2020-end. At fiscal third quarter-end, it had $1.7 billion of unrestricted homebuilding cash and $2 billion of available capacity on the revolving credit facility. Total homebuilding liquidity was $3.7 billion.

At June-end, it had 47,300 homes in inventory, of which 15,400 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 517,100 lots at quarter-end. Of these, 24% were owned, and 76% were controlled through land and lot purchase contracts.

At June-end, homebuilding debt totaled $2.6 billion, with homebuilding debt to total capital of 16%. The trailing 12-month return on equity was 29.5%.

D.R. Horton repurchased 2.6 million shares of common stock for $241.2 million during the fiscal third quarter. The company’s remaining stock repurchase authorization — which has no expiration date — as of Jun 30, 2021 was $758.8 million.

Fiscal 2021 Guidance Raised

Total revenues are now expected in the range of $27.6-$28.1 billion, up from the earlier expectation of $26.8-$27.5 billion. Homes closed are expected within 83,000-84,500 units (up from the prior expectation of 82,500-84,500 units).

Zacks Rank & Peer Releases

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.

Lennar Corporation LEN — which currently sports a Zacks Rank #1 — reported better-than-expected results for second-quarter fiscal 2021 (ended May 31, 2021). The quarterly results benefited from solid execution of homebuilding and financial services businesses. Also, robust housing market conditions added to its bliss.

KB Home KBH — currently sporting a Zacks Rank #1 — recently reported second-quarter fiscal 2021 results. Although earnings surpassed the Zacks Consensus Estimate, revenues missed the same. Nonetheless, both earnings and revenues grew significantly from a year ago buoyed by strong housing market demand.

NVR, Inc. NVR — which currently holds a Zacks Rank #3 — reported second-quarter 2021 results, wherein both earnings and homebuilding revenues surpassed the Zacks Consensus Estimate as well as improved significantly from the year-ago period.

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