D.R. Horton Stock Sinks on Q4 Earnings and Revenue Miss

D.R. Horton, Inc. (DHI), the nation's largest homebuilder, reported fourth-quarter earnings and revenue that fell short of analysts' expectations, sending its stock lower. The company's results were impacted by a slowdown in housing demand and higher mortgage rates, as well as increased inventory levels and longer construction cycle times.

The company reported earnings per share (EPS) of $3.92, missing the consensus estimate of $4.17. Revenue decreased 5% year-over-year to $10.0 billion, also below the expected $10.2 billion. Net sales orders increased 1% to 19,035 homes but decreased 2% in value to $7.1 billion. Homes closed in the quarter rose 3% to 23,647 homes, while the sales order backlog decreased 20% to 12,180 homes and 19% in value to $4.8 billion.

The company's return on equity (ROE) was 19.9% for the fiscal year 2024, and homebuilding pre-tax return on inventory (ROI) was 27.8%. Operating cash flow totaled $2.2 billion in FY24, and the company had a total liquidity of $7.6 billion as of September 30, 2024.

D.R. Horton attributed the earnings miss to a cautious approach by homebuyers, who are waiting for lower mortgage rates in 2025. The company is addressing affordability concerns by offering incentives such as mortgage rate buydowns and selling more homes with smaller floor plans. Despite the challenges, the company remains optimistic about its fiscal 2025 outlook, expecting revenue of $36.0 billion to $37.5 billion and homes closed to be between 90,000 and 92,000.

In conclusion, D.R. Horton's Q4 earnings and revenue miss can be attributed to a slowdown in housing demand, higher mortgage rates, and increased inventory levels. The company is taking strategic initiatives to address affordability concerns and is optimistic about its fiscal 2025 outlook. Investors should monitor the company's progress and the broader housing market trends to make informed investment decisions.