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D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2023 (ended Mar 31, 2023) results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Shares of the company gained more than 5% in the pre-market trading session on Apr 20.
Although, earnings and revenues declined on a year-over-year basis due to prevailing softness in the market, the company highlighted that net sales orders increased 73% from the fiscal first quarter, defying the prevailing higher mortgage rates and inflationary pressures.
The company believes that the housing demand will remain favorable, courtesy of a limited supply of new and existing homes at affordable price points despite challenging market conditions, comprising higher rates and uncertain economic conditions.
D.R. Horton, Inc. Price, Consensus and EPS Surprise
DHI reported adjusted earnings of $2.73 per share for the fiscal second quarter, beating the Zacks Consensus Estimate of $1.90 by 43.7% but decreasing 32.3% from the year-ago figure of $4.03.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) were $7.97 billion, down 0.3% year over year. The reported figure topped the consensus mark of $6.56 billion by 21.6%.
The consolidated pre-tax margin contracted to 15.6% in the quarter from 23.5% a year ago. The decline was due to a 730-basis-point (bps) decrease in the home sales gross margin and a 50-bps increase in homebuilding SG&A expenses (as a percentage of revenues).
Segmental Details
Homebuilding revenues of $7.47 billion decreased by a meager 0.5% from the prior-year quarter. Home sales were $7.45 billion, slightly down from $7.5 billion reported a year ago. Home closings were down 0.8% from the prior-year quarter to 19,664 homes.
Net sales orders were down 5% year over year to 23,142 homes. The value of net orders also declined 11% year over year to $8.6 billion. The cancelation rate (on gross sales orders) was 18%, up from 16% a year ago.
Order backlog of homes at the end of the fiscal second quarter was 19,237 homes, down 43% year over year. Moreover, the value of the backlog was down 44% from the prior year to $7.4 billion.
Financial Services’ revenues decreased 2.6% from the year-ago level to $216.4 million.
Forestar contributed $301.5 million to total quarterly revenues, with 2,979 lots sold, reflecting a decline from the $421.6 million in revenues generated a year ago on 5,788 lots sold.
The Rental business generated revenues of $224.1 million for the quarter, up from $222.9 million a year ago.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $3.07 billion as of Mar 31, 2023, compared with $2.57 billion at the end of fiscal 2022. It had $2 billion of available capacity on the revolving credit facility at the end of 2022. Total homebuilding liquidity was $4.4 billion.
At the end of March 2023, DHI had 43,600 homes in inventory, of which 24,800 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 547,000 lots at the fiscal second-quarter end. Of these, 25% were owned and 75% were controlled through land and lot purchase contracts.
At the end of Mar 31, 2023, homebuilding debt totaled $2.7 billion, with a homebuilding debt to total capital of 11.5%. The homebuilding debt includes $400 million of senior notes, which will mature in August 2023. The trailing 12-month return on equity was 27.2%.
D.R. Horton repurchased 3.2 million shares of common stock for $303.2 million in the fiscal second quarter. The company’s remaining stock repurchase authorization as of Mar 31, 2023, totaled $17 million. In April 2023, the company approved the repurchase of up to $1 billion of stock and the new authorization has no expiration date.
The company paid out dividends of $85.6 million in the quarter and announced a quarterly cash dividend of 25 cents per share, payable May 10, 2023, to stockholders of record as of May 3.
FY23 View
DHI expects consolidated revenues of $31.5-$33 billion (versus $33.5 billion in fiscal 2022). Homes closed are anticipated to be 77,000-80,000 units. For the Rental business, the company expects homes closed within 4,000-5,000 units. The income tax rate is expected to be 24%. Fiscal 2023 cash flow from homebuilding operations on a consolidated basis is expected to be higher than fiscal 2022.
KB Home (KBH - Free Report) reported better-than-expected first-quarter fiscal 2023 (ended Feb 28, 2023) results, defying the challenging housing market conditions. Its earnings and revenues beat the Zacks Consensus Estimate.
KBH’s quarterly revenues were at the high end of its guided range, and both operating and gross margins performed better than expected. KBH’s book value per share grew to $44.80, up 27% from a year ago.
RPM International Inc. (RPM - Free Report) reported third-quarter fiscal 2023 (ended Feb 28, 2023) results, wherein its earnings and sales beat the Zacks Consensus Estimate. Meanwhile, although sales increased, earnings declined year over year.
In the quarter, RPM’s net sales benefited from reshoring and infrastructure spending.
Acuity Brands, Inc. (AYI - Free Report) reported mixed results for second-quarter fiscal 2023 (ended Feb 28, 2023), wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark for the 11th consecutive quarter. Revenues missed the same for two quarters in a row, following six straight quarters of beat.
On a year-over-year basis, AYI’s earnings and revenues rose as both lighting and spaces businesses’ sales grew, while the adjusted operating profit expanded and adjusted earnings per share increased.
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D.R. Horton (DHI) Shares Rise on Q2 Earnings & Revenue Beat
D.R. Horton, Inc. (DHI - Free Report) reported second-quarter fiscal 2023 (ended Mar 31, 2023) results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Shares of the company gained more than 5% in the pre-market trading session on Apr 20.
Although, earnings and revenues declined on a year-over-year basis due to prevailing softness in the market, the company highlighted that net sales orders increased 73% from the fiscal first quarter, defying the prevailing higher mortgage rates and inflationary pressures.
The company believes that the housing demand will remain favorable, courtesy of a limited supply of new and existing homes at affordable price points despite challenging market conditions, comprising higher rates and uncertain economic conditions.
D.R. Horton, Inc. Price, Consensus and EPS Surprise
D.R. Horton, Inc. price-consensus-eps-surprise-chart | D.R. Horton, Inc. Quote
Earnings, Revenue & Margin Discussion
DHI reported adjusted earnings of $2.73 per share for the fiscal second quarter, beating the Zacks Consensus Estimate of $1.90 by 43.7% but decreasing 32.3% from the year-ago figure of $4.03.
Total revenues (Homebuilding, Forestar, Rental and Financial Services) were $7.97 billion, down 0.3% year over year. The reported figure topped the consensus mark of $6.56 billion by 21.6%.
The consolidated pre-tax margin contracted to 15.6% in the quarter from 23.5% a year ago. The decline was due to a 730-basis-point (bps) decrease in the home sales gross margin and a 50-bps increase in homebuilding SG&A expenses (as a percentage of revenues).
Segmental Details
Homebuilding revenues of $7.47 billion decreased by a meager 0.5% from the prior-year quarter. Home sales were $7.45 billion, slightly down from $7.5 billion reported a year ago. Home closings were down 0.8% from the prior-year quarter to 19,664 homes.
Net sales orders were down 5% year over year to 23,142 homes. The value of net orders also declined 11% year over year to $8.6 billion. The cancelation rate (on gross sales orders) was 18%, up from 16% a year ago.
Order backlog of homes at the end of the fiscal second quarter was 19,237 homes, down 43% year over year. Moreover, the value of the backlog was down 44% from the prior year to $7.4 billion.
Financial Services’ revenues decreased 2.6% from the year-ago level to $216.4 million.
Forestar contributed $301.5 million to total quarterly revenues, with 2,979 lots sold, reflecting a decline from the $421.6 million in revenues generated a year ago on 5,788 lots sold.
The Rental business generated revenues of $224.1 million for the quarter, up from $222.9 million a year ago.
Balance Sheet Details
D.R. Horton’s cash, cash equivalents and restricted cash totaled $3.07 billion as of Mar 31, 2023, compared with $2.57 billion at the end of fiscal 2022. It had $2 billion of available capacity on the revolving credit facility at the end of 2022. Total homebuilding liquidity was $4.4 billion.
At the end of March 2023, DHI had 43,600 homes in inventory, of which 24,800 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 547,000 lots at the fiscal second-quarter end. Of these, 25% were owned and 75% were controlled through land and lot purchase contracts.
At the end of Mar 31, 2023, homebuilding debt totaled $2.7 billion, with a homebuilding debt to total capital of 11.5%. The homebuilding debt includes $400 million of senior notes, which will mature in August 2023. The trailing 12-month return on equity was 27.2%.
D.R. Horton repurchased 3.2 million shares of common stock for $303.2 million in the fiscal second quarter. The company’s remaining stock repurchase authorization as of Mar 31, 2023, totaled $17 million. In April 2023, the company approved the repurchase of up to $1 billion of stock and the new authorization has no expiration date.
The company paid out dividends of $85.6 million in the quarter and announced a quarterly cash dividend of 25 cents per share, payable May 10, 2023, to stockholders of record as of May 3.
FY23 View
DHI expects consolidated revenues of $31.5-$33 billion (versus $33.5 billion in fiscal 2022). Homes closed are anticipated to be 77,000-80,000 units. For the Rental business, the company expects homes closed within 4,000-5,000 units. The income tax rate is expected to be 24%. Fiscal 2023 cash flow from homebuilding operations on a consolidated basis is expected to be higher than fiscal 2022.
Zacks Rank
Currently, D.R. Horton carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Few Recent Construction Releases
KB Home (KBH - Free Report) reported better-than-expected first-quarter fiscal 2023 (ended Feb 28, 2023) results, defying the challenging housing market conditions. Its earnings and revenues beat the Zacks Consensus Estimate.
KBH’s quarterly revenues were at the high end of its guided range, and both operating and gross margins performed better than expected. KBH’s book value per share grew to $44.80, up 27% from a year ago.
RPM International Inc. (RPM - Free Report) reported third-quarter fiscal 2023 (ended Feb 28, 2023) results, wherein its earnings and sales beat the Zacks Consensus Estimate. Meanwhile, although sales increased, earnings declined year over year.
In the quarter, RPM’s net sales benefited from reshoring and infrastructure spending.
Acuity Brands, Inc. (AYI - Free Report) reported mixed results for second-quarter fiscal 2023 (ended Feb 28, 2023), wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark for the 11th consecutive quarter. Revenues missed the same for two quarters in a row, following six straight quarters of beat.
On a year-over-year basis, AYI’s earnings and revenues rose as both lighting and spaces businesses’ sales grew, while the adjusted operating profit expanded and adjusted earnings per share increased.