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D.R. Horton, Inc. (DHI - Free Report) exhibited an impressive performance in the first quarter of fiscal 2017, with earnings and revenues beating the Zacks Consensus Estimate. Shares climbed 2.12% in pre-market trading following the release.
The Texas-based homebuilder’s order trends remained strong in the quarter.
Earnings & Revenue Discussion
The company reported earnings of 55 cents per share which beat the Zacks Consensus Estimate of 47 cents by 17%. Earnings also increased 31% year over year driven by higher home sales.
Total revenue (homebuilding and financial services) of $2.904 billion beat the Zacks Consensus Estimate of $2.719 billion by 6.8%. Total revenue also rose 20.2% year over year.
Homebuilding revenues of $2.83 billion rose 19.7% year over year. Home sales increased 19.5% year over year to $2.79 billion aided by higher home deliveries. Land/lot sales and other revenues amounted to $28.4 million, up from $20.2 million a year ago.
Home closings increased 20% to 9,404 homes. The company registered growth in the Midwest, Southeast, South Central, Southwest and West regions. Meanwhile, the Eastern region was on par with the year-ago level.
Net sales orders rose 15% to 9,241 homes on continued improvement. Orders increased across all operating regions. The value of net orders grew 17% to $2.8 billion. Cancellation rate of 22% was lower than 23% in the year-earlier quarter.
The quarter-end sales order backlog (under contract) rose 6% to 11,312 homes. Backlog value grew 7% to $3.4 billion.
Revenues at the financial services segment increased 41.2% to $78.1 million.
Margins
Gross profit on home sales was $552.9 million, up 18.5% year over year. However, gross margin on home sales contracted 10 basis points (bps) year over year to 19.8% due to higher warranty and litigation costs, as a percentage of homebuilding revenues.
Homebuilding selling, general and administrative expenses (SG&A) were $268.4 million, up 11% from the prior-year quarter. SG&A expenses, as a percentage of homebuilding revenues, were 9.5%, down 70 bps year over year.
Homebuilding pre-tax income rose 28.4% year over year to $293.9 million with pre-tax margin improving 100 bps owing to lower SG&A expenses. Higher homebuilding revenues drove the upside. Pre-tax income from financial services came in at $24.2 million, up 95.2% year over year.
Consolidated pre-tax income was $318.1 million in the quarter, up 31.8% year over year. Pre-tax profit margin improved 100 bps to 11%.
Balance Sheet
D.R. Horton’s homebuilding cash, cash equivalents and restricted cash totaled $1,124.3 million as of Dec 31, 2016, compared with $1,281.3 million as of Sep 30, 2015.
In the fiscal first quarter, D.R. Horton used $33.3 million in operating cash compared with $1.5 million in the prior-year quarter.
Fiscal 2017 Outlook
D.R. Horton maintains a positive outlook for revenues and profits, both of which are expected to increase double digits, annually.
Total revenue is projected in the range of $13.4 billion to $13.8 billion. Consolidated pre-tax margin guidance is estimated in the band of 11.2% to 11.5%. Homebuilding SG&A expenses, as a percentage of homebuilding revenues, will likely be around 9.0%.
Home closing is expected to be between 43,500 homes and 45,500 homes.
Tax rate is likely to be at around 35%. Cash flow from operations is estimated between $300 million and $500 million.
KB Home (KBH - Free Report) reported an impressive fourth quarter of fiscal 2016, with earnings of 40 cents per share surpassing the Zacks Consensus Estimate of 37 cents by 8.1%. On a year-over-year basis, the reported figure was down 7%.
Upcoming Peer Releases
PulteGroup, Inc. (PHM - Free Report) is slated to release fourth-quarter 2016 results on Jan 26. The Zacks Consensus Estimate for the quarter’s earnings is 58 cents per share.
Masco Corporation (MAS - Free Report) will release fourth-quarter 2016 earnings on Feb 9. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 35 cents per share.
D.R. Horton, Inc. Price, Consensus and EPS Surprise
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D.R. Horton (DHI) Q1 Earnings, Revenues Beat; View Intact
D.R. Horton, Inc. (DHI - Free Report) exhibited an impressive performance in the first quarter of fiscal 2017, with earnings and revenues beating the Zacks Consensus Estimate. Shares climbed 2.12% in pre-market trading following the release.
The Texas-based homebuilder’s order trends remained strong in the quarter.
Earnings & Revenue Discussion
The company reported earnings of 55 cents per share which beat the Zacks Consensus Estimate of 47 cents by 17%. Earnings also increased 31% year over year driven by higher home sales.
Total revenue (homebuilding and financial services) of $2.904 billion beat the Zacks Consensus Estimate of $2.719 billion by 6.8%. Total revenue also rose 20.2% year over year.
Home Closings and Orders
Homebuilding revenues of $2.83 billion rose 19.7% year over year. Home sales increased 19.5% year over year to $2.79 billion aided by higher home deliveries. Land/lot sales and other revenues amounted to $28.4 million, up from $20.2 million a year ago.
Home closings increased 20% to 9,404 homes. The company registered growth in the Midwest, Southeast, South Central, Southwest and West regions. Meanwhile, the Eastern region was on par with the year-ago level.
Net sales orders rose 15% to 9,241 homes on continued improvement. Orders increased across all operating regions. The value of net orders grew 17% to $2.8 billion. Cancellation rate of 22% was lower than 23% in the year-earlier quarter.
The quarter-end sales order backlog (under contract) rose 6% to 11,312 homes. Backlog value grew 7% to $3.4 billion.
Revenues at the financial services segment increased 41.2% to $78.1 million.
Margins
Gross profit on home sales was $552.9 million, up 18.5% year over year. However, gross margin on home sales contracted 10 basis points (bps) year over year to 19.8% due to higher warranty and litigation costs, as a percentage of homebuilding revenues.
Homebuilding selling, general and administrative expenses (SG&A) were $268.4 million, up 11% from the prior-year quarter. SG&A expenses, as a percentage of homebuilding revenues, were 9.5%, down 70 bps year over year.
Homebuilding pre-tax income rose 28.4% year over year to $293.9 million with pre-tax margin improving 100 bps owing to lower SG&A expenses. Higher homebuilding revenues drove the upside. Pre-tax income from financial services came in at $24.2 million, up 95.2% year over year.
Consolidated pre-tax income was $318.1 million in the quarter, up 31.8% year over year. Pre-tax profit margin improved 100 bps to 11%.
Balance Sheet
D.R. Horton’s homebuilding cash, cash equivalents and restricted cash totaled $1,124.3 million as of Dec 31, 2016, compared with $1,281.3 million as of Sep 30, 2015.
In the fiscal first quarter, D.R. Horton used $33.3 million in operating cash compared with $1.5 million in the prior-year quarter.
Fiscal 2017 Outlook
D.R. Horton maintains a positive outlook for revenues and profits, both of which are expected to increase double digits, annually.
Total revenue is projected in the range of $13.4 billion to $13.8 billion. Consolidated pre-tax margin guidance is estimated in the band of 11.2% to 11.5%. Homebuilding SG&A expenses, as a percentage of homebuilding revenues, will likely be around 9.0%.
Home closing is expected to be between 43,500 homes and 45,500 homes.
Tax rate is likely to be at around 35%. Cash flow from operations is estimated between $300 million and $500 million.
D.R. Horton carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Release
KB Home (KBH - Free Report) reported an impressive fourth quarter of fiscal 2016, with earnings of 40 cents per share surpassing the Zacks Consensus Estimate of 37 cents by 8.1%. On a year-over-year basis, the reported figure was down 7%.
Upcoming Peer Releases
PulteGroup, Inc. (PHM - Free Report) is slated to release fourth-quarter 2016 results on Jan 26. The Zacks Consensus Estimate for the quarter’s earnings is 58 cents per share.
Masco Corporation (MAS - Free Report) will release fourth-quarter 2016 earnings on Feb 9. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 35 cents per share.
D.R. Horton, Inc. Price, Consensus and EPS Surprise
D.R. Horton, Inc. Price, Consensus and EPS Surprise | D.R. Horton, Inc. Quote
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>