D.R. Horton Reports Big Revenue Increase in 2Q15



Second-quarter revenues exceed expectations

D.R. Horton (DHI) reported 2Q15 revenues of $2.3 billion, a 38% increase on a year-over-year basis and a sequential increase of about 3.8%. Revenues came in higher than Wall Street expectations of $2.2 billion.

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Orders rise in both dollars and units

Net sales orders for the first quarter of 2015 rose 30% on a unit basis, to 11,135 homes, and 33% in dollar terms to $3.2 billion. The cancellation rate was 20%.

Backlog increased 21% to 12,177 units and 27% in dollar terms, to $3.6 billion. This bodes well for the rest of the year. 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, “The spring selling season at D.R. Horton is off to a strong start. In the second quarter, the value of our net sales orders, home sales revenue and sales order backlog increased year-over-year by 33%, 38% and 27%, respectively. Our sales increased by double-digit percentages in all three of our brands, reflecting strong performance in our core D.R. Horton communities and the expansion of our luxury brand, Emerald Homes, and our entry-level brand, Express Homes. Our increasingly diverse product offerings are enabling us to expand our industry-leading market share.”

Implications for the homebuilding sector

Both sales and earnings per share beat Wall Street estimates. The stock traded down about 5.4% on the day, however. We saw the same sort of “buy the rumor, sell the fact” trading action with Lennar (LEN), who beat expectations but still sold off after the announcement.

The spring selling season is starting off strong, and there’s finally some activity with first-time homebuyers, according to the National Association of Realtors. Increasing activity in the entry-level cohort not only helps D.R. Horton but also builders like PulteGroup (PHM). D.R. Horton reported strong activity in its Emerald Homes brand, the luxury end of its offerings. This bodes well for Toll Brothers (TOL).

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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