Fourth-quarter revenues in line with expectations
D.R. Horton, Inc. (DHI) reported fourth-quarter revenues of $2.1 billion—a 33% increase on a year-over-year basis and a sequential increase of about 15%. Revenues came in more or less in line with Wall Street expectations.
Orders rise in both dollars and units
Net sales orders for the first quarter rose 38% on a unit basis, to 7,135 homes, and 41% in dollar terms to $2.0 billion. The cancellation rate was 28%.
Backlog increased 21% in unit terms, from 8,205 to 9,888, and 29% in dollar terms, from $2.2 billion to $2.9 billion. This bodes well for the spring selling season. Backlog is an indicator of future revenues, which makes it an important statistic that investors should track.
Management comments on the quarter
Donald R. Horton, chairman of the board, said this about the quarter: “With the largest market share in Company history and 46% more homes closed than any other builder in the most recently reported twelve-month period, D.R. Horton has solidified its position to be the nation’s largest builder for the 13th consecutive year in calendar 2014. We completed fiscal 2014 with strong profitability in our fourth quarter with $250.8 million of pre-tax income and a 10.1% pre-tax operating margin. Net homes sold, closed and in backlog all increased by double-digit percentages in both the fourth quarter and the full fiscal year. For the year, our homebuilding and financial services operations generated a 24% increase in pre-tax income to $814.2 million, on consolidated revenues of $8.0 billion.”
While sales were in line with Wall Street expectations, earnings per share missed expectations. The stock still rallied, however. Interest rates do not seem to be hurting business—if anything, the company views jobs as the biggest driver of its business—not interest rates. Other builders such as KB Home (KBH) have echoed similar sentiments on earnings calls.
If the spring selling season turns out to be strong, it will not only benefit D.R. Horton, but also builders including PulteGroup, Inc. (PHM), Lennar Corporation (LEN), and Standard Pacific Corp. (SPF).
Investors who want to invest in the homebuilding sector as a whole should look at the SPDR S&P Homebuilders ETF (XHB).