Second quarter revenues come in well in excess of expectations
D.R. Horton reported second quarter revenues of $1.7 billion, which was a 18.5% increase on a year-over-year basis, and a sequential drop of about 1.6%. The Street was expecting revenues to come in at $1.58 billion. Investors were cheered by the report, sending the stock up 8%.
Orders rise in both dollars and units
Net sales orders for the first quarter rose 9% on a unit basis to 8,569 homes and 20% in dollar terms to $2.4 billion. The cancellation rate was 19%. Most of the other builders like Standard Pacific (SPF) or Lennar (LEN) also reported increases in orders, along with increases in prices. PulteGroup (PHM) reported a decrease in orders on a unit basis.
Backlog increased as well, which bodes well for the spring selling season
Backlog increased 5% in unit terms (from 9,553 to 10,059) and 18% in dollar terms (from $2.4 billion to $2.8 billion). Backlog is an indicator of future revenues, which is an important statistic to keep track of.
Outlook for the near future
Donald R. Horton, chairman of the board, characterized the near-term sales environment this way: “Housing market conditions remain favorable, and as expected, the pace and strength of the improvement varies significantly across our different operating markets. Our broad geographic footprint, diversified product offerings, solid balance sheet, and robust finished lot supply put us in a strong position to capture demand and increase revenues and profitability in the second half of our fiscal year.”
The comments about the company’s outlook eased fears from the Street, which was still digesting a terrible new home sales number last week. The company discussed how interest rates are affecting sales, and it said that increasing rates are having less of an effect as borrowers become used to the idea of higher rates. If anything, the company views jobs as the biggest driver of its business—not interest rates. Other builders like KB Home (KBH) have echoed similar sentiments on their earnings calls.
Investors who want to invest in the homebuilding sector as a whole should look at the S&P SPDR Homebuilder ETF (XHB).