D.R. Horton reports Q1 earnings below expectations, but remains optimistic amid strong sales orders
D.R. Horton, one of the largest homebuilding companies in the United States, released its Q1 (Dec) earnings report. The company reported earnings per share (EPS) of $2.82, which was $0.05 lower than Street expectations. However, the company's revenues showed a 6.5% year-over-year increase, reaching $7.73 billion, surpassing expectations.
Despite falling slightly short of the earnings forecast, D.R. Horton remains confident in its future financial performance. The company reaffirmed its guidance for FY24 and expects revenues in the range of $36-37 billion.
D.R. Horton experienced a robust increase in net sales orders for the first quarter, with a 35% rise to 18,069 homes and a 38% surge in value to $6.8 billion, compared to the same period in the prior year. This growth can be attributed to the limited supply of affordable homes, bolstering demand in the housing market. The cancellation rate for the first quarter of fiscal 2024 improved to 19% from 27% in the prior year's quarter, indicating a more stable sales environment.
However, the company's sales order backlog decreased by 11% in the number of homes, amounting to 13,965 homes, and 12% in value to $5.4 billion, compared to the backlog at the end of December 2022. This decline may reflect the challenging operating conditions caused by inflation and elevated mortgage interest rates.
Despite elevated inflation and mortgage interest rates , net sales orders rose by 35% compared to the prior year quarter, attributed to the limited supply of new and existing homes at affordable price points and favorable demographics supporting housing demand.
For the fiscal year, DR Horton expects homes closed to range from 87,000 to 90,000, a forecast that remains consistent with its previous guidance of 86,000 to 89,000 homes closed. The company reiterated its fiscal 2024 guidance, projecting cash flow provided by homebuilding operations to be approximately $3.0 billion and share repurchases of about $1.5 billion.
Donald R. Horton, the Chairman of the Board, expressed satisfaction with the company's performance in the first fiscal quarter of 2024. Despite facing inflationary pressure and elevated mortgage interest rates, D.R. Horton achieved solid financial results. The strong net sales orders growth of 35% demonstrates the continued demand for affordable housing, which is further supported by favorable demographics.
Shares of DR Horton fell by 6.4% following the earnings miss, prompting investors to keep an eye on competitors such as Lennar Corporation (LBH), KB Home (BZH), Lennar Corporation (LEN), Toll Brothers (TOL), and M/I Homes (MTH).
D.R. Horton remains well-positioned to adapt to changing market conditions and leverage its flexible lot supply and affordable product offerings. The company aims to maximize returns and capital efficiency by effectively managing its inventory across its communities. With a strong balance sheet, ample liquidity, and low leverage, D.R. Horton maintains financial flexibility and intends to enhance long-term shareholder value through consistent dividends and share repurchases.
Although the slightly lower-than-expected earnings may have caused a 6.4% decline in the company's stock price, investors should consider the positive sales trends, favorable market conditions, and the company's proactive approach to capitalize on the demands of the housing market.