uploads///DHI Revenues

D.R. Horton surprises Wall Street with good revenue growth



Fourth-quarter revenues in line with expectations

D.R. Horton (DHI) reported first-quarter revenues of $2.3 billion—a 35% increase on a year-over-year basis and a sequential decrease of about 7%. Revenues came higher than Wall Street expectations.

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Orders rise in both dollars and units

Net sales orders for the first quarter rose 35% on a unit basis, to 7,370 homes, and 40% in dollar terms to $2.1 billion. The cancellation rate was 24%.

Backlog increased 21% to 9,285 units, and 29% in dollar terms, to $2.7 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

Chairman of the board Donald R. Horton noted, “Our fiscal 2015 is off to a great start, highlighted by $220.7 million of pre-tax income, on $2.3 billion of revenues. Our position as the largest and most geographically diverse homebuilder provides a strong platform for us to compete for new home sales, evidenced by year-over-year increases in the value of our net sales orders, home sales revenue, and sales order backlog of 40%, 37%, and 29%, respectively.”

On the conference call, the company noted increasing weekly traffic, which bodes well for the spring selling season.

Market response

Both sales and earnings per share beat Wall Street estimates. The stock traded up about 4% on the numbers. Both Lennar (LEN) and KB Home (KBH) disappointed Wall Street on guidance earlier this year and were hit on earnings.

If the spring selling season turns out to be strong, it will not only benefit D.R. Horton, but also builders including PulteGroup (PHM) 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).


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