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D.R. Horton (DHI) Stock Up on Q2 Earnings Beat, Orders Rise

D.R. Horton, Inc. DHI reported second-quarter fiscal 2024 (ended Mar 31, 2024) results, with earnings and revenues surpassing Zacks Consensus Estimate.

Shares of the company rose 5% in the pre-market trading session on Apr 18.

On a year-over-year basis, both the top and bottom lines increased. The upside was backed by the supply of new and existing homes as affordable price points remain limited and robust housing demand is supported by favorable demographics amid elevated inflation and mortgage/interest rates.

Earnings, Revenues & Margin Discussion

DHI reported adjusted earnings of $3.52 per share for the fiscal second quarter, topping the Zacks Consensus Estimate of $3.08 by 14.3% and rallying 28.9% from the year-ago figure of $2.73.

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

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Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $9.12 billion, up 14% year over year. The reported figure topped the consensus mark of $8.27 billion by 10.2%.

The consolidated pre-tax profit margin came in at 16.8% for the quarter.

Segment Details

Homebuilding revenues of $8.5 billion increased 13% from the prior-year quarter. Home sales were $8.47 billion, up 13.7% from a year ago period. Home closings rose 15% from the prior year’s quarter to 22,548 homes.

Net sales orders were up 14% year over year to 26,456 homes. The value of net orders also increased 17% year over year to $10.1 billion. The cancellation rate (on gross sales orders) was 15%, down from 18% a year ago.

Order backlog of homes at the end of the fiscal second quarter was 17,873 homes, down 7% year over year. Moreover, the value of the backlog was down 5% from the prior year to $7 billion.

Financial Services’ revenues increased 4.3% from the year-ago level to $225.6 million.

Forestar contributed $333.8 million to total quarterly revenues with 3,289 lots sold, indicating growth from $301.5 million in revenues generated a year ago on 2,979 lots sold.

The Rental business generated revenues of $33.3 million for the quarter compared with $34.6 million a year ago.

Balance Sheet Details

D.R. Horton’s cash, cash equivalents and restricted cash totaled $3.06 billion as of Mar 31, 2024, compared with $3.87 billion at the end of fiscal 2023. It had $2.6 billion of available capacity on the revolving credit facility on Mar 31, 2024. Total homebuilding liquidity was $5.7 billion.

At the end of March 2024, DHI had 45,000 homes in inventory, of which 27,600 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 617,200 lots at the end of the second fiscal quarter. Of these, 23% were owned and 77% were controlled through land and lot purchase contracts.

At the end of second-quarter fiscal 2024, debt totaled $5.9 billion, with a debt to total capital of 20%. The trailing 12-month return on equity was 22.2%.

D.R. Horton repurchased 2.7 million shares of common stock for $402.2 million during the fiscal second quarter. In October 2023, its board authorized $1.5 billion shares of common stock, replacing the previous authorization ($32.8 million remaining of $234.0 million at the time of authorization due to repurchases made subsequent to year-end). The remaining stock repurchase authorization on Mar 31, 2024, was $901.1 million.

Raised Fiscal 2024 Views

DHI now expects consolidated revenues to be in the range of $36.7-$37.7 billion, up from the prior expectation of $36-$37.3 billion. DHI reported $35.5 billion in revenues in the fiscal 2023. Homes closed are anticipated within 89,000-91,000 units versus 87,000-90,000 units expected earlier. The income tax rate is now expected to be 23.5-24%.

Fiscal 2024 cash flow from homebuilding operations is expected to be nearly $3 billion. Share repurchases are projected at approximately $1.6 billion.

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.

Recent Releases From the Construction Sector

KB Home KBH reported better-than-expected results in first-quarter fiscal 2024 (ended Feb 29, 2024). Both earnings and revenues beat the Zacks Consensus Estimate and rose on a year-over-year basis.

Looking forward to the second quarter and full-year 2024, KBH foresees enhanced conditions in the housing market and ongoing positive trends in the supply chain. Leveraging the advantages of its Built to Order model, which provides buyers with choices, flexibility and affordability, the company is confident in its ability to effectively navigate potential fluctuations in housing market conditions.

Lennar Corporation LEN reported first-quarter fiscal 2024 results, wherein its earnings surpassed the Zacks Consensus Estimate but revenues missed the same. On a year-over-year basis, both the top and bottom lines increased, given the company’s emphasis on maintaining a steady production rate to drive sales momentum. Lennar strategically utilized pricing, incentives, marketing expenditure and dynamic pricing insights to ensure steady sales volume despite fluctuations in interest rates.

Acuity Brands, Inc. AYI reported impressive results in second-quarter fiscal 2024 (ended Feb 29, 2024), with earnings and revenues surpassing the Zacks Consensus Estimate.

Despite a year-over-year decline in sales in the lighting business, AYI reported strong fiscal second-quarter performance driven by increased focus on margins and cash generation. This approach resulted in a higher adjusted operating profit margin and increased adjusted diluted earnings per share.

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