Home builder D.R. Horton soars on better-than-expected earnings

Image from D.R. Horton's website
(Image from D.R. Horton's website)

By Zhu Zhu

Shares of D.R. Horton Inc., the largest U.S. homebuilder, surged nearly 6 percent Tuesday, as earnings and revenues handily beat analysts’ expectations.

Profit in the quarter ended Dec. 31, soared 31 percent to $206.9 million, from $158.9 million in the year-earlier quarter, far surpassing the analysts’ concensus expectation of $179.8 million. The company’s earnings per diluted share of 55 cents, exceeding Wall Street expectations of 48 cents.

Revenue at the Fort Worth, Texas based homebuilder, jumped 20 percent to $2.8 billion from $2.4 billion, while the analysts’ expectation was $2.7 billion.

“These results reflect the diverse offerings across our broad international footprint, as well as solid mortgage condition,” said David Auld, CEO at D.R. Horton in a conference call.

Graph showing net income of D.R. Horton
Graph showing net income of D.R. Horton over time.(Source: Bloomberg)

There is also more demand for housing in a growing economy, analysts said.

“The increase in revenue is largely driven by the rising consumer demand in new homes. The demand is growing in the whole industry,” said Brian Bernard, an analyst at Morningstar Inc.

“D.R. Horton has provided many affordable entry-level homes called Express Homes, which has an average price of about $215,000,” Bernard said.

Compared with the median existing single-family home sales’ price of $233,500, the entry-level homes D.R. Horton provides are more affordable, said Bernard.

In December, existing home sales decreased 2.8 percent to a seasonally adjusted annual rate of 5.49 million from November, according to a National Associations of Realtors report Tuesday.

The trend that more people are buying new homes will last at least until 2020, said Bernard. Even though interest rates have risen, people are getting higher wages and more job opportunities, which all make the new homes more affordable for them, Bernard added.

D.R. Horton expressed some caution as the company enters a crucial home-selling period.

“Despite stronger earnings management reaffirmed its 2017 guidance, noting results significantly depend on the spring-selling season,” Jade Rahmani, an analyst at an investment bank Keefe, Bruyette & Woods, said in a research note.

For the 2017 forecast, the company expected double-digit annual growth in both revenue and pretax profit, Auld said in the conference call, unchanged from its previous outlook.

Photo at top: Image from D.R.Horton’s website. (Zhu Zhu/MEDILL)