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D.R. Horton's (DHI) Q2 Earnings Top Estimates, View Soft

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D.R. Horton, Inc. (DHI - Free Report) reported better-than-expected results in second-quarter fiscal 2019, thanks to the key spring selling season, lower mortgage rates and moderate home prices. Also, its industry-leading market share, broad geographic footprint and affordable product offerings across multiple brands helped the company post improved results.

However, this leading homebuilder’s shares tanked 3.6% following its earnings release, probably owing to soft revenue guidance for fiscal 2019.

Earnings came in at 93 cents per share in the quarter, surpassing the Zacks Consensus Estimate of 86 cents by 8.1%. The reported figure also increased 2% from the year-ago profit level of 91 cents.

Revenue Discussion

Total revenues (Homebuilding, Forestar and Financial Services) came in at $4.1 billion, up 9% year over year. The reported figure also topped the consensus mark of $4 billion.
 
Home Closings and Orders

Homebuilding revenues of $4 billion increased 8.4% from the prior-year quarter. Home sales also increased 8.4% year over year to $3.98 billion, aided by higher home deliveries. Land/lot sales and other revenues were $14.9 million, increasing from $13.6 million a year ago.

Home closings increased 10% to 13,480 homes and 8% from the prior-year quarter to $4 billion in value. It recorded growth across all regions (barring Southwest and West) comprising East, Midwest, Southeast and South Central.

Net sales orders increased 6% year over year and 52% sequentially to 16,805 homes, with improvement in East, Midwest, Southeast regions, except South Central, Southwest and West. Value of net orders improved 4% year over year to $4.9 billion. The cancellation rate was 19%, same as the prior-year quarter.

Quarter-end sales order backlog (under contract) increased 6.6% from the prior-year quarter to 16,890 homes. Backlog value increased 3.4% from the year-ago quarter to $5 billion.

Revenues at the Financial Services segment increased to $101.6 million from the year-ago level of $94.9 million. Forestar contributed $65.4 million to its quarterly revenues, reflecting an improvement of 189.4% year over year.

D.R. Horton, Inc. Price, Consensus and EPS Surprise

D.R. Horton, Inc. Price, Consensus and EPS Surprise | D.R. Horton, Inc. Quote

Margins

The company’s consolidated pre-tax margin contracted 50 basis points to 11.2% in the quarter from 11.7% a year ago.

Balance Sheet

D.R. Horton’s cash, cash equivalents and restricted cash totaled $698.8 million as of Mar 31, 2019 compared with $1,473.1 million on Sep 30, 2018.

Fiscal 2019 Guidance

The company expects revenues between $16.7 billion and $17 billion, below the Zacks Consensus Estimate of $17.1 billion (considering the mid-point of the guided range), and homes closing within 55,000-56,000. Homebuilding cash flow from operations is projected to be at least $1 billion. Effective tax rate is expected to be approximately 24.5%.

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.

Recent Peer Releases

PulteGroup Inc.’s (PHM - Free Report) first-quarter 2019 earnings and revenues surpassed the respective Zacks Consensus Estimate. Earnings per share came in at 59 cents, beating the consensus mark of 47 cents by 25.5%. The bottom line was in line with the year-ago figure. Total revenues of $1.99 billion outpaced the consensus mark and the year-ago figure of $1.97 billion.

KB Home’s (KBH - Free Report) first-quarter fiscal 2019 earnings of 31 cents per share outpaced the Zacks Consensus Estimate of 27 cents by 14.8%. Total revenues of $811.5 million, however, missed the consensus mark of $829.3 million.

Lennar Corporation (LEN - Free Report) reported first-quarter fiscal 2019 (ended Feb 28, 2019) results, wherein earnings and revenues missed the respective Zacks Consensus Estimate by 1.3% and 5.3%.

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