D.R. Horton Earnings Hurt by Higher Costs

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D.R. Horton Inc. (NYSE: DHI) reported fiscal fourth-quarter and full-year 2014 results before markets opened Tuesday. The homebuilder reported quarterly diluted earnings per share (EPS) of $0.45 on revenues of $2.4 billion. In the same period a year ago, it reported EPS of $0.40 on revenue of $1.8 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.48 and $2.38 billion in revenue.

For the full year ending in September, Horton reported EPS of $1.50, compared with $1.33 for fiscal 2013. Revenues totaled $7.9 billion, up from $6.1 billion a year ago. The consensus estimates called for EPS of $1.54 on revenues of $7.81 billion.

Home sales closed rose from 6,866 in the fourth quarter of 2013 to 8,612. Horton’s sales order backlog grew from 8,205 a year ago to 9,888, with a total value of $2.21 billion.

Horton’s cancellation rate (cancelled sales orders divided by gross sales orders) for the fourth quarter was 28%. Net sales orders for the fiscal year increased 18% to 29,709 homes from 25,120 homes in fiscal 2013, and the value of net sales orders increased 27% to $8.3 billion from $6.6 billion.

Revenue from home sales for the quarter rose by a third, but the cost of sales rose about 26%. Analysts were expecting a 20% rise in EPS, but those expectations were tanked on rising costs that chewed through the higher sales prices. The stock will get nailed for this when trading begins Tuesday.

The company’s CEO said:

We are well-positioned to continue to grow both our revenues and pre-tax profits at a double-digit pace with our solid balance sheet, industry-leading market share, broad geographic footprint, diversified product offerings across our three brands and our inventories of homes and finished lots. With a 29% increase in our beginning backlog value and a greater than 20% year-over-year increase in our October net sales orders, we are off to a great start in fiscal 2015.

Other than that statement, Horton did not offer guidance. The consensus estimates for the first quarter of the company’s 2015 fiscal year call for EPS of $0.36 on revenues of $1.92 billion. For the full year, analysts so far expect EPS of $1.84 on revenues of $9.38 billion.

Shares were up about 0.8% in premarket trading Tuesday, at $23.25 in a 52-week range of $17.67 to $25.23. Thomson Reuters had a consensus analyst price target of around $24.75 before the results were announced.

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