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D.R. Horton Inc. (DHI - Analyst Report) reported net earnings of 30 cents per share in the fourth quarter of fiscal 2012 versus 11 cents in the year-ago quarter. Earnings per share beat the Zacks Consensus Estimate of 28 cents. The year-over-year earnings upsurge was driven by an increase in homebuilding revenues.

Homebuilding revenues climbed 21.0% year over year to $1.30 billion, driven by growth in net sales orders, homes closed and sales order backlog. Reported revenues, however, missed the Zacks Consensus Estimate of $1.37 billion.

Quarter in Detail

Most of the company’s revenue originates from the sale of completed homes and a small portion of revenue comes from the sale of land and lots.

Home sales increased 21% year over year to $1.29 billion driven by strong growth in net sales orders. On the other hand, land sales contributed $10.5 million to revenues compared with $0.4 million in the prior year.

Home closings were up 12.0% to 5,575 in the reported quarter compared with 4,987 homes in the year-ago period.

Net sales orders grew 24% in the fourth quarter of 2012 to 5,276 homes. The value of net orders grew 35% to $1.3 billion from $0.9 billion in the fourth quarter of 2011, owing to the improving housing market.  

The company’s backlog totaled 7,240 homes as of September 30, 2012, up 49% from 4,854 homes as of September 30, 2011. Potential housing revenues from backlog rose 61% to $1.7 billion from $1.0 billion in the prior year quarter, primarily on the back of an increase in backlog revenue in all operating regions. Sales order backlog represent homes under contract but not yet closed at the end of a certain period.

Gross profit on home sales was $232.7 million versus $172.6 million in the prior-year quarter. Selling, general & administrative (SG&A) expenses were $145.9 million, up 18% from the prior-year quarter.

Fiscal 2012

The company reported net earnings of $2.77 per share in fiscal 2012 versus 23 cents in fiscal 2011. Earnings per share beat the Zacks Consensus Estimate of $2.76. The year-over-year earnings upsurge was driven by an increase in homebuilding revenues. The company reported homebuilding revenue of $4.2 billion in fiscal 2012, up 19% from fiscal 2011. Homes closed grew 13% to 18,890 in fiscal 2012.


The company expects profits in fiscal 2013. The company is well positioned with its strong balance sheet and liquidity and intends to expand its business in fiscal 2013.

D.R. Horton’s strong cash flows, its geographic diversity and its solid cost discipline also encourage us. The company has been able to capitalize on the benefits of improving housing market. Given its strong inventory, the company is likely to continue to perform better in the upcoming quarters. All said, we would still prefer to remain on the sidelines until we witness a speedy and broad-based recovery in the overall housing market.

A peer of KB Home (KBH - Analyst Report), D.R. Horton carries a Zacks #3 Rank that translates into a short-term Hold rating. Longer-term, we are maintaining our Neutral recommendation on D.R. Horton.

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