D.R. Horton (DHI) Q1 Earnings & Revenues Top, View Updated

D.R. Horton, Inc. (NYSE:DHI) came up with yet another stellar performance in the first quarter of fiscal 2018. Earnings and revenues surpassed the Zacks Consensus Estimate, courtesy of a solid housing market scenario. Shares of the homebuilder increased 1.5% in the pre-market trading session after the earnings release at the time of writing.

Earnings & Revenues Discussion

The company reported adjusted earnings of 77 cents per share, surpassing the Zacks Consensus Estimate of 64 cents by 20.3%. The adjustment was primarily due to one-time charge owing to the changes in the tax law. Adjusted earnings increased from the year-ago profit level of 55 cents.

Total revenues (Homebuilding, Forestar and Financial Services) were $3.33 billion. The figure beat the Zacks Consensus Estimate of $3.28 billion and increased 14.8% year over year.

Home Closings and Orders

Homebuilding revenues of $3.2 billion increased 14% year over year. Home sales increased 13.8% year over year to $3.18 billion, aided by higher home deliveries. Land/lot sales and other revenues were $36.4 million, up from $28.4 million a year ago.

Home closings increased 15% to 10,788 homes, while it increased 14% to $3.2 billion in value. The company registered growth across all regions comprising East, Midwest, Southeast, South Central, Southwest and West.

Net sales orders increased 16% to 10,753 homes on continued improvement. Orders increased across all operating regions. The value of net orders grew 17% to $3.2 billion. The cancellation rate was 22%, same as the prior-year quarter.

Quarter-end sales order backlog (under contract) increased 8.7% to 12,294 homes. Backlog value increased 10.6% to $3.8 billion.

Revenues at the Financial Services segment increased 3.7% to $81 million. Forestar contributed $30.8 million to the quarterly revenues.

Margins

Home sales gross margin expanded 100 basis points (bps) year over year to 20.8%. The upside was driven by lower warranty, litigation and interest costs as a percentage of homebuilding revenues.

Selling, general and administrative (SG&A) expenses, as a percentage of homebuilding revenues, were 9.5%, same with the year ago level.

Balance Sheet

D.R. Horton’s cash, cash equivalents and restricted cash totaled $974 million as of Dec 31, 2017 compared with $1,024.3 million as of Sep 30, 2017.

D.R. Horton, Inc. Price, Consensus and EPS Surprise

D.R. Horton, Inc. Price, Consensus and EPS Surprise | D.R. Horton, Inc. Quote

Fiscal 2018 Guidance

The company has maintained its consolidated revenue guidance in the range of $15.5 billion to $16.3 billion. Homes closing is expected to fall between 50,500 and 52,500 units. Homebuilding SG&A expense, as a percentage of homebuilding revenues, are expected to be around 8.7%.

D.R. Horton has updated its home sales gross margin forecast to 20-21% (versus 20% expected earlier).

Consolidated pre-tax profit margin is now expected to be approximately 11.8-12% (against 11.5% to 11.7% expected earlier).

Cash flow from operations is expected to be at least $700 million, excluding Forestar (versus previous expectation of $500).

D.R. Horton expects income tax rate of approximately 26% and diluted share count increase of less than 1%.

Zacks Rank

D.R. Horton carries a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

PulteGroup Inc.’s (NYSE:PHM) fourth-quarter 2017 adjusted earnings of 85 cents per share beat the Zacks Consensus Estimate of 84 cents by 1.2%. Also, quarterly earnings reflect a solid 27% jump from the year-ago quarter’s 67 cents.

NVR, Inc. (NYSE:NVR) reported fourth-quarter 2017 adjusted earnings of $43.41 per share, missing the Zacks Consensus Estimate of $48.95 by 11.3%. Without the adjustment, NVR reported earnings of $28.88 per share, decreasing 24% year over year.

Lennar Corporation’s (NYSE:LEN) fourth-quarter fiscal 2017 adjusted earnings of $1.29 per share fell shy of the Zacks Consensus Estimate of $1.50 by 14% and decreased 1.5% from the year-ago level of $1.31.

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