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D.R. Horton's (DHI) Q1 Earnings Top, Margin Fall, Shares Drop

D.R. Horton, Inc. DHI reported first-quarter fiscal 2023 (ended Dec 31, 2022) results, wherein earnings and revenues surpassed their respective Zacks Consensus Estimate. Shares of the company grew 0.87% in the pre-market trading session on Jan 24.

Yet, on a year-over-year basis, the metrics declined due to prevailing softness in the market.

Pertaining to the result, Donald R. Horton, the chairman of the board, said, “Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited and demographics supporting housing demand remain favorable.”

Earnings, Revenue & Margin Discussion

DHI reported adjusted earnings of $2.76 per share for the fiscal first quarter, beating the Zacks Consensus Estimate of $2.27 by 21.6% but decreasing 13% from the year-ago figure of $3.17.

D.R. Horton, Inc. Price, Consensus and EPS Surprise


D.R. Horton, Inc. Price, Consensus and EPS Surprise
D.R. Horton, Inc. Price, Consensus and EPS Surprise

D.R. Horton, Inc. price-consensus-eps-surprise-chart | D.R. Horton, Inc. Quote


Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $7.26 billion, up 2.9% year over year. The reported figure topped the consensus mark of $6.5 billion by 11.6%.

Consolidated pre-tax margin contracted to 17.5% for the quarter from 21.4% a year ago.

Segment Details

Homebuilding revenues of $6.74 billion increased just 1% from the prior-year quarter. Home sales were $6.71 billion, slightly up from $6.66 billion reported a year ago. Home closings were down 6% from the prior-year quarter to 17,340 homes.

Net sales orders were down 38% year over year to 13,382 homes. The value of net orders also declined 40% year over year to $4.9 billion. The cancellation rate (on gross sales orders) was 27%, up from 15% a year ago.

Order backlog of homes at the end of the fiscal first quarter was 15,759 homes, down 46% year over year. Moreover, the value of the backlog was down 44% from the prior year to $6.2 billion.

Financial Services’ revenues decreased 25.7% from the year-ago level to $137 million.

Forestar contributed $216.7 million to total quarterly revenues with 2,263 lots sold, reflecting a decline from $407.6 million in revenues generated a year ago on 4,516 lots sold.

The Rental business generated revenues of $327.5 million for the quarter compared with $156.5 million a year ago.

Balance Sheet Details

D.R. Horton’s cash, cash equivalents and restricted cash totaled $2.61 billion as of Dec 31, 2022, compared with $2.57 billion at the end of fiscal 2022. It had $2 billion of available capacity on the revolving credit facility at the end of 2022. Total homebuilding liquidity was $4 billion.

At the end of December 2022, DHI had 43,200 homes in inventory, of which 27,800 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 551,000 lots at 2022-end. Of these, 25% were owned and 75% were controlled through land and lot purchase contracts.

At the end of 2022, homebuilding debt totaled $3 billion, with a homebuilding debt to total capital of 12.8%. The homebuilding debt includes $700 million of senior notes, which will mature in fiscal 2023. The trailing 12-month return on equity was 31.5%.

D.R. Horton repurchased 1.4 million shares of common stock for $118.1 million during the fiscal first quarter. The company’s remaining stock repurchase authorization as of Dec 31, 2023, totaled $320.2 million.

The company paid dividends of $86.1 million during the quarter and announced a quarterly cash dividend of 25 cents per share, payable on Feb 14, 2023, to stockholders of record on Feb 7.

Zacks Rank

Currently, D.R. Horton carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Few Recent Construction Releases

KB Home KBH reported lackluster results in fourth-quarter fiscal 2022 (ended Nov 30, 2022). Both the earnings and revenues lagged the Zacks Consensus Estimate.

On a year-over-year basis, both metrics increased on the back of measures undertaken to stimulate additional sales during the seasonally slower time frame.

RPM International Inc. RPM reported tepid results in second-quarter fiscal 2023 (ended Nov 30, 2022). Its earnings met the Zacks Consensus Estimate and sales missed the same. On a year-over-year basis, both metrics grew on strong segmental sales.

During the quarter, the company introduced the MAP 2025 operating improvement program and is ahead of targets so far in the fiscal second quarter.

Acuity Brands, Inc. AYI reported mixed first-quarter fiscal 2023 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Earnings beat the consensus mark in four consecutive quarters, while revenues missed the estimate after beating the same for the third straight quarter.

Nevertheless, earnings and revenues increased on a year-over-year basis. The upside was backed by product vitality and service in its lighting and space businesses.

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