Real Estate Remains Weak but Rents Rise Faster than Inflation
The benchmark iShares Dow Jones US Real Estate ETF (IYR) comprises 114 stocks. We can divide the ETF by market capitalization.
The two big events dominating this week are the continued slew of earnings report and the FOMC meeting on Wednesday.
The NAHB–Wells Fargo Housing Market Index measures homebuilder sentiment. It gauges how builders view current and future sales of single-family residences. It asks builders to characterize sales as good, fair, or poor.
In June, existing home sales were an annualized 5.49 million. On a year-over-year basis, they’re up 9.6%.
Building permits are used as a predictor of future housing volumes, although they have less predictive power than housing starts.
Housing starts rose from an upward-revised 1,069,000 to 1,174,000 in June. This was well in excess of Wall Street estimates of just over 1.1 million.
As part of its market segmentation strategy, D.R. Horton launched a variety of different brands, including D.R. Horton, America’s Builder, Express Homes, and Emerald Home.
D.R. Horton sees allocation in major homebuilding sector-specific ETFs like the iShares Dow Jones US Home Construction Index Fund (ITB).
A closer look at D.R. Horton’s (DHI) trailing 12-month price-to-earnings multiple shows that it is in line with its historical valuation.
D.R. Horton’s operating strategy is focused on leveraging its strong financial and competitive position to generate strong profitability, improve cash flows, and increase returns on inventory investments.
D.R. Horton’s strong revenue growth in Q2 was attributed mainly to higher closings, pricing gains, and improving order trends.
D.R. Horton’s (DHI) return on equity was at 11.35% as of March 2015. Other major competitors like Pulte Group (PHM) and Toll Brothers (TOL) reported ROE of 9.65% and 9.78%, respectively.
Among its peers, D.R. Horton is on the higher side in terms of dividend yield at 0.96%.
D.R. Horton (DHI) has been prudent with its cash management in the past and even had a substantial amount of cash balance during the downturn.
D.R. Horton (DHI) had been aggressively reducing its debt position during the downturn and early in the recovery.
D.R. Horton’s EBITDA margin was at 10.1% as on March 2015, much better compared to 2.3% for fiscal 2011.
D.R. Horton’s (DHI) gross margin increased consistently from 16.1% in 2011 to 20.8% in 2013 and 21.3% in 2014.
Cost of homes sold is the highest of the company’s costs at 78.1%, followed by SG&A at 10.6%, and cost of land sold at 1.6%.
D.R. Horton (DHI) reported a consolidated revenue of $8.02 billion for fiscal 2014, up by a robust 82.3% over 2010 and 28.2% over fiscal 2013.
D.R. Horton slowed the growth of its land and lot inventories in 2014 and increased homes inventories to get a larger share of new home demand and generate higher returns on land investments.
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