Housing

How DR Horton and Beazer Earnings Stack Up Against Each Other

Before the markets opened on Tuesday, two major home developers reported their fiscal year-end results. The housing market may have an uncertain outlook as we approach a potential rate hike, but these reports will help shine a guiding light. 24/7 Wall St. has taken data from both the D.R. Horton Inc. (NYSE: DHI) and Beazer Homes USA Inc. (NYSE: BZH) reports to compare and contrast.

D.R. Horton reported its fiscal fourth-quarter results as $0.64 in earnings per share (EPS) on $3.1 billion in revenue, which compares to Thomson Reuters consensus estimates of $0.62 in EPS on revenue of $3.04 billion. In the same period of the previous year, the homebuilder posted EPS of $0.45 and $2.40 billion in revenue.

During this quarter, homebuilding revenue increased 28%, while homes closed in the quarter increased 23% to 10,576, compared to 8,612 homes in the year-ago quarter. Book value per shares increased 14% to $15.99.

Donald R. Horton, chairman of the board, commented on earnings:

With 36,648 homes closed in fiscal 2015, D.R. Horton is the largest builder in the United States for a 14th consecutive year. Fiscal 2015 was also our third consecutive year of 30% or greater growth in both home sales revenues and homebuilding pre-tax income. While significantly growing the business, we generated $700 million of cash from operations this year. In the fourth quarter, our consolidated pre-tax income increased 35% to $338.8 million, and our pre-tax operating margin improved 60 basis points to 10.7%. For the year, we generated a 38% increase in pre-tax income to more than $1.1 billion on consolidated revenues of $10.8 billion.

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Shares of D.R. Horton closed Monday down 2.1% at $28.77, with a consensus analyst price target of $32.32 and a 52-week trading range of $22.12 to $33.06. Following the release of the earnings report, shares were up 2.5% at $29.50 in early trading indications Tuesday.

Beazer reported its fiscal fourth-quarter results as $0.97 in EPS, adjusted for pretax gains and to account for discontinued operations, on revenue of $632.85 million. That compared to consensus estimates that called for EPS of $0.89 on $650.84 million in revenue. The same period from the previous year had $0.58 in EPS and $545.90 million in revenue.

New home orders in the quarter fell 0.3% from the same period in the previous year, while total home closings increased nearly 12% to 1,896 from 1,695. However, Homebuilding revenue increased 22% in the quarter compared to last year.

Allan Merrill, CEO of Beazer Homes, said:

After returning to profitability last year, 2015 represented a meaningful step forward in achieving our “2B-10” goals, with growth in both revenue and Adjusted EBITDA arising from higher community count, additional closings and an increase in average sales prices. This was accomplished while maintaining our operating margins, as the benefit from improving leverage and higher prices offset the impact from rising costs.

Beazer shares closed Monday down 4.7% at $13.51, with a consensus price target of $20.00 and a 52-week range of $12.95 to $21.19. Shares were relatively flat at $13.50 in Tuesday’s premarket.

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