D.R. Horton (DHI 39.56, -1.09, -2.69%) is trading modestly lower after
pre-announcing fourth quarter results this morning.
Fourth quarter closings increased 11% to 14,674 homes as home sales revenue for the quarter increased 9% to $4.4 bln. Home sales revenue tends to account for ~96% of total revenue, but came in 6.7% below estimates, indicating a slight miss. Home sales revenue in fiscal 2018 increased 14% to $15.5 bln. The company guided for fiscal 2018 total revenue of $16.1-16.3 bln, so the 96% bogey would put total revenue within the low end of the company's outlook.
The soft sales number won't do much to help the rather dire investor sentiment in the housing market.
Still, forward-looking net sales orders remained quite healthy, posting double digit growth in the fourth quarter, but slowing a bit sequentially. Orders grew 11% or 10% in dollars versus 13% and 12% in the third quarter, respectively.
Housing stocks are out of favor as the cycle grows old while the Fed continues to raise interest rates.
Last week, Lennar (LEN) missed third quarter order estimates and lowered its fourth quarter orders outlook, citing a healthy pause in the housing market and disruptions from Hurricane Florence. Lennar said that a pause in the housing market was natural given the recent strength.
Homebuilders remain upbeat on the new home market as healthy demand and a supply deficit persists.
Chairman of the Board Donald R. Horton said "Sales absorptions increased across all of our brands and geographic regions compared to the prior year, showing continued solid demand for our product offerings through September... We are confident in our team's ability to drive growth as economic and housing fundamentals remain favorable, inventory levels are low and we continue to see good demand in our markets, particularly at affordable price points. With almost 30,000 homes in inventory at the end of the year and an attractive lot position, we continue to expect strong performance over the next year and are well-positioned to grow our consolidated revenues at a double-digit pace."
D. R. Horton previously guided for fiscal 2019 revenue up 10-15% with a pre-tax margin of 13%. The company is targeting operating cash flow over $1.25 bln by fiscal 2020.
DHI has the second largest enterprise value among publicly traded homebuilders and trades at ~1.8x book value and 9x EPS, a modest premium to the group.
The company will release full fiscal fourth quarter financial results on the morning of Thursday, November 8.
- OUR VIEW
- LEARNING CENTER