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D.R. Horton (DHI) Q3 Earnings Beat, Revenues Miss, Shares Drop
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D.R. Horton, Inc.’s (DHI - Free Report) third-quarter fiscal 2022 earnings beat the Zacks Consensus Estimate but revenues missed the same. The company also lowered its revenue guidance for the full year, given expected completion dates of homes under construction and current market conditions.
Shares of the company slipped 1.9% in the pre-market trading session on Jul 21, 2022.
Nonetheless, D.R. Horton’s fiscal third-quarter results were highlighted by 53% improvement in EPS and 540 basis point (bps) expansion in pre-tax profit margin. These results reflect production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.
Pertaining to the U.S. housing market condition, Donald R. Horton, the chairman of the board, said, “During the first half of fiscal 2022 and most of our third quarter, housing market conditions remained strong. During the quarter, we were still selling homes later in the construction cycle to better ensure the certainty of the home close date for our homebuyers as we continued working to stabilize our construction cycle times. In June, we began to see a moderation in housing demand as mortgage interest rates increased substantially and inflationary pressures remained elevated. Although these pressures may persist for some time, we believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply and our strong trade and supplier relationships.”
Earnings & Revenue Discussion
DHI reported adjusted earnings of $4.67 per share for the reported quarter, surpassing the Zacks Consensus Estimate of $4.51 by 3.5% and increasing a whopping 53% from the year-ago period.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $8.79 billion, up 20.6% year over year. The reported figure, however, missed the consensus mark of $8.98 billion.
D.R. Horton, Inc. Price, Consensus and EPS Surprise
Homebuilding revenues of $8.35 billion increased 18.5% from the prior-year quarter. The upside was led by higher pricing.
Home closings were down 1% from the prior-year quarter to 21,308 homes, but homes closed increased 18.4% in value to $8.34 billion.
Net sales orders were down 7% year over year to 16,693 homes. Nonetheless, the value of net orders advanced 8% year over year to $6.9 billion. The cancellation rate was 24%, up from 17% a year ago.
Order backlog of homes at the end of the quarter was 29,244 homes, down 9% year over year. Nonetheless, the value of the backlog was up 8% from the prior year to $11.9 billion.
Financial Services’ revenues increased 35% from the year-ago level to $254.3 million.
Forestar contributed $308.5 million to total quarterly revenues, reflecting a decline from $312.9 million a year ago.
The Rental business generated revenues of $109.7 million for the quarter compared with $23.1 million a year ago.
Margins
Consolidated pre-tax margin expanded 540 bps to 24.8% for the quarter.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $1.68 billion as of Jun 30, 2022 compared with $3.24 billion at fiscal 2021 end. At fiscal third-quarter end, it had $1.6 billion of available capacity on the revolving credit facility. Total homebuilding liquidity was $2.8 billion.
At fiscal third-quarter end, DHI had 56,400 homes in inventory, of which 27,200 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 598,200 lots at fiscal third-quarter end. Of these, 22% were owned, and 78% were controlled through land and lot purchase contracts.
At the end of June, homebuilding debt totaled $3.7 billion, with homebuilding debt to total capital of 17%. The trailing 12-month return on equity was 35.1%.
D.R. Horton repurchased 4.7 million shares of common stock for $310 million during the fiscal third quarter. The company’s remaining stock repurchase authorization as of Jun 30, 2022 totaled $690 million. The company also paid dividends of $79.2 million during the quarter.
Fiscal 2022 Guidance Updated
Total revenues are now expected in the range of $33.8-$34.6 billion compared with $35.3-$36.1 billion projected earlier. Homes closed are anticipated within 83,000-85,000 units compared with 88,000-90,000 units, expected earlier.
Zacks Rank
Currently, D.R. Horton carries a Zacks Rank #5 (Strong Sell).
KBR, Inc. (KBR - Free Report) , currently carrying a Zacks Rank #1, provides scientific, technology and engineering solutions to governments and commercial customers. Its mission-critical government services, high-end and differentiated government business work, strong margin performance, proprietary technology solutions and a significant increase in backlog (particularly in Government Solution) are expected to boost 2022 earnings.
KBR’s 2022 earnings are likely to rise 7.9%. The company’s earnings estimates have remained stable over the past 60 days.
Primoris Services Corporation (PRIM - Free Report) , currently carrying a Zacks Rank #1, provides a wide range of construction, fabrication, maintenance, replacement and engineering services.
PRIM’s 2022 earnings are likely to rise 21.7%. The company’s earnings estimates have increased to $2.64 from $2.59 per share over the past seven days.
Toll Brothers Inc. (TOL - Free Report) , currently carrying a Zacks Rank #2 (Buy), mostly offers luxury homes and its communities are located in prosperous suburban areas with easy access to major cities.
TOL’s expected earnings growth rate for fiscal 2022 is 53.2%. The consensus mark for its fiscal 2022 earnings has moved up to $10.16 from $9.87 per share in the past 60 days.
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D.R. Horton (DHI) Q3 Earnings Beat, Revenues Miss, Shares Drop
D.R. Horton, Inc.’s (DHI - Free Report) third-quarter fiscal 2022 earnings beat the Zacks Consensus Estimate but revenues missed the same. The company also lowered its revenue guidance for the full year, given expected completion dates of homes under construction and current market conditions.
Shares of the company slipped 1.9% in the pre-market trading session on Jul 21, 2022.
Nonetheless, D.R. Horton’s fiscal third-quarter results were highlighted by 53% improvement in EPS and 540 basis point (bps) expansion in pre-tax profit margin. These results reflect production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.
Pertaining to the U.S. housing market condition, Donald R. Horton, the chairman of the board, said, “During the first half of fiscal 2022 and most of our third quarter, housing market conditions remained strong. During the quarter, we were still selling homes later in the construction cycle to better ensure the certainty of the home close date for our homebuyers as we continued working to stabilize our construction cycle times. In June, we began to see a moderation in housing demand as mortgage interest rates increased substantially and inflationary pressures remained elevated. Although these pressures may persist for some time, we believe we are well-positioned to meet changing market conditions with our affordable product offerings and lot supply and our strong trade and supplier relationships.”
Earnings & Revenue Discussion
DHI reported adjusted earnings of $4.67 per share for the reported quarter, surpassing the Zacks Consensus Estimate of $4.51 by 3.5% and increasing a whopping 53% from the year-ago period.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $8.79 billion, up 20.6% year over year. The reported figure, however, missed the consensus mark of $8.98 billion.
D.R. Horton, Inc. Price, Consensus and EPS Surprise
D.R. Horton, Inc. price-consensus-eps-surprise-chart | D.R. Horton, Inc. Quote
Segment Details
Homebuilding revenues of $8.35 billion increased 18.5% from the prior-year quarter. The upside was led by higher pricing.
Home closings were down 1% from the prior-year quarter to 21,308 homes, but homes closed increased 18.4% in value to $8.34 billion.
Net sales orders were down 7% year over year to 16,693 homes. Nonetheless, the value of net orders advanced 8% year over year to $6.9 billion. The cancellation rate was 24%, up from 17% a year ago.
Order backlog of homes at the end of the quarter was 29,244 homes, down 9% year over year. Nonetheless, the value of the backlog was up 8% from the prior year to $11.9 billion.
Financial Services’ revenues increased 35% from the year-ago level to $254.3 million.
Forestar contributed $308.5 million to total quarterly revenues, reflecting a decline from $312.9 million a year ago.
The Rental business generated revenues of $109.7 million for the quarter compared with $23.1 million a year ago.
Margins
Consolidated pre-tax margin expanded 540 bps to 24.8% for the quarter.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $1.68 billion as of Jun 30, 2022 compared with $3.24 billion at fiscal 2021 end. At fiscal third-quarter end, it had $1.6 billion of available capacity on the revolving credit facility. Total homebuilding liquidity was $2.8 billion.
At fiscal third-quarter end, DHI had 56,400 homes in inventory, of which 27,200 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 598,200 lots at fiscal third-quarter end. Of these, 22% were owned, and 78% were controlled through land and lot purchase contracts.
At the end of June, homebuilding debt totaled $3.7 billion, with homebuilding debt to total capital of 17%. The trailing 12-month return on equity was 35.1%.
D.R. Horton repurchased 4.7 million shares of common stock for $310 million during the fiscal third quarter. The company’s remaining stock repurchase authorization as of Jun 30, 2022 totaled $690 million. The company also paid dividends of $79.2 million during the quarter.
Fiscal 2022 Guidance Updated
Total revenues are now expected in the range of $33.8-$34.6 billion compared with $35.3-$36.1 billion projected earlier. Homes closed are anticipated within 83,000-85,000 units compared with 88,000-90,000 units, expected earlier.
Zacks Rank
Currently, D.R. Horton carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 Better-Ranked Construction Stocks to Buy
KBR, Inc. (KBR - Free Report) , currently carrying a Zacks Rank #1, provides scientific, technology and engineering solutions to governments and commercial customers. Its mission-critical government services, high-end and differentiated government business work, strong margin performance, proprietary technology solutions and a significant increase in backlog (particularly in Government Solution) are expected to boost 2022 earnings.
KBR’s 2022 earnings are likely to rise 7.9%. The company’s earnings estimates have remained stable over the past 60 days.
Primoris Services Corporation (PRIM - Free Report) , currently carrying a Zacks Rank #1, provides a wide range of construction, fabrication, maintenance, replacement and engineering services.
PRIM’s 2022 earnings are likely to rise 21.7%. The company’s earnings estimates have increased to $2.64 from $2.59 per share over the past seven days.
Toll Brothers Inc. (TOL - Free Report) , currently carrying a Zacks Rank #2 (Buy), mostly offers luxury homes and its communities are located in prosperous suburban areas with easy access to major cities.
TOL’s expected earnings growth rate for fiscal 2022 is 53.2%. The consensus mark for its fiscal 2022 earnings has moved up to $10.16 from $9.87 per share in the past 60 days.