D.R. Horton Inc. (DHI) has regularly bought homebuilding operations of smaller local homebuilders to expand its geographic presence. In fact, the company enjoys one of the broadest geographic diversities in the industry and is not dependent on any one market.
Last week, to gain further strength in the highly lucrative housing market in the Southeastern region of United States, D.R. Horton announced the acquisition of homebuilding operation of Atlanta’s largest builder, Crown Communities for approximately $210 million in cash.
With the acquisition, D.R. Horton takes control of Crown’s sales order backlog of approximately 420 homes sold, 640 homes in inventory and 2,350 lots. Crown builds homes in Georgia, South Carolina and eastern Alabama.
Atlanta is the primary transportation hub of the Southeastern region. D.R. Horton already has a strong presence in the region which, coupled with the Crown acquisition, should allow it to capture further market share in the region. The Southeast division of D.R. Horton performed decently well in the last reported quarter - second-quarter fiscal 2014. Both net sales orders and home closings grew in the region. The Crown acquisition should further improve results in the region.
In Aug 2012, the company bought the homebuilding business of Breland Homes which also expanded D.R. Horton’s presence in Southeastern region. Last year, in October, the company acquired homebuilding operations of Regent Homes which operates in Charlotte, Greensboro and Winston-Salem, N.C. The acquisition thus expanded D.R. Horton’s presence in the Eastern region of United States. In fact, the East geographic segment of D.R. Horton recorded the highest increase in orders and home closings in the second quarter helped by the Regent Homes acquisition.
Other Stocks to Consider
D.R. Horton carries a Zacks Rank #3 (Hold). Other building construction stocks worth considering include Gafisa S.A. (GFA), TRI Pointe Homes, Inc. (TPH) and Toll Brothers, Inc. (TOL). While Toll Brothers sports a Zacks Rank #1 (Strong Buy),Gafisa and TRI Pointe Homescarry a Zacks Rank #2 (Buy).