D.R. Horton (DHI) Q4 Earnings & Revenues Miss, Shares Drop

D.R. Horton, Inc.’s DHI fourth-quarter fiscal 2022 earnings and revenues missed the respective Zacks Consensus Estimate. Shares of the company slipped 3.1% following the earnings release on Nov 9, 2022.

Nonetheless, D.R. Horton’s fiscal 2022 results were highlighted by 42% improvement in pre-tax income, 350 basis point (bps) expansion in pre-tax profit margin and 21% increase in revenues. These results reflect production capabilities, industry-leading market share, broad geographic footprint and diverse product offerings across multiple brands.  

Donald R. Horton, the chairman of the board, said, "We are well-positioned to navigate changing market conditions and are focused on turning our inventory to maximize returns and capital efficiency in each of our communities. Our homebuilding cash flow from operations in fiscal 2022 was $1.9 billion, and our homebuilding leverage at the end of the year was 13.2%, the lowest in Company history. Our strong balance sheet, liquidity and low leverage provide us with significant financial flexibility, and we plan to maintain our disciplined approach to investing capital to enhance the long-term value of our company, including returning capital to our shareholders through both dividends and share repurchases on a consistent basis.”

Earnings & Revenue Discussion

DHI reported adjusted earnings of $4.67 per share for the reported quarter, missing the Zacks Consensus Estimate of $5.06 by 7.7% but increasing 26% from the year-ago period.

Total revenues (Homebuilding, Forestar, Rental and Financial Services) came in at $9.64 billion, up 19% year over year. The reported figure, however, missed the consensus mark of $10.04 billion.

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

Segment Details

Homebuilding revenues of $9.39 billion increased 23.1% from the prior-year quarter. The upside was led by higher pricing and deliveries.

Home closings were up 5.8% from the prior-year quarter to 23,212 homes, and homes closed increased 23.4 % in value to $9.37 billion.

Net sales orders were down 14.8% year over year to 13,582 homes. Nonetheless, the value of net orders declined 10.1% year over year to $5.43 billion. The cancelation rate was 32%, up from 19% a year ago.

Order backlog of homes at the end of fiscal 2022 was 19,614 homes, down 25% year over year. Moreover, the value of the backlog was down 16% from the prior year to $8 billion.

Financial Services’ revenues decreased 39.7% from the year-ago level to $134.2 million.

Forestar contributed $381.4 million to total quarterly revenues, reflecting a decline from $418.7 million a year ago.

The Rental business generated revenues of $21.1 million for the quarter compared with $212.9 million a year ago.

Margins

Consolidated pre-tax margin expanded to 21.4% for the quarter from 21.3% a year ago.

Fiscal 2022 Highlights

Earnings came in at $16.51 per share, reflecting a 45% jump from a year ago. Total revenues were $33.5 billion, up 21% from fiscal 2021. Deliveries were up 1% in units and 20.2% in value. Pre-tax margin expanded 350 bps to 22.8%.

Balance Sheet Details

D.R. Horton’s cash, cash equivalents and restricted cash totaled $2.57 billion as of Sep 30, 2022, compared with $3.24 billion at the fiscal 2021-end. It had $2 billion of available capacity on the revolving credit facility at the end of fiscal 2022. Total homebuilding liquidity was $4 billion.

At the end of fiscal 2022, DHI had 46,400 homes in inventory, of which 27,200 were unsold. D.R. Horton’s homebuilding land and lot portfolio totaled 573,200 lots at the fiscal 2022-end. Of these, 23% were owned and 77% were controlled through land and lot purchase contracts.

At the end of September, homebuilding debt totaled $2.9 billion, with homebuilding debt to total capital of 13.2%. The trailing 12-month return on equity was 34.5%.

D.R. Horton repurchased 3.6 million shares of common stock for $251.7 million during the fiscal fourth quarter and 14 million shares for $1.1 billion during fiscal 2022. The company’s remaining stock repurchase authorization as of Sep 30, 2022, totaled $438.3 million. The company also paid dividends of $78.2 million during the quarter and $316.5 million during fiscal 2022.

Zacks Rank

Currently, D.R. Horton carries a Zacks Rank #5 (Strong Sell).

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

A Few Recent Releases

Beacon Roofing Supply, Inc. BECN reported strong results for third-quarter 2022. Both earnings and revenues surpassed their respective Zacks Consensus Estimate and increased significantly on a year-over-year basis. The solid results were backed by strong net sales and operational improvement.

Julian Francis, BECN’s president and CEO, said, “We continued to deliver value to our customers, driving record third quarter net income and our 11th straight quarter of year-over-year increases in Adjusted EBITDA. At the same time, we continued making strategic investments toward achieving our Ambition 2025 growth and margin targets.”

Fastenal Company FAST reported third-quarter 2022 results, wherein earnings and revenues topped the respective Zacks Consensus Estimate. The company’s top and bottom lines also improved on a year-over-year basis, given the strong demand in markets associated with industrial capital goods and commodities.

FAST reported daily sales of $27.8 million, reflecting an increase of 18% year over year in the reported quarter. The upside was mainly due to higher unit sales owing to good demand from industrial capital goods and commodities, which offset softer markets tied to consumer goods and relatively lower growth in construction.

United Rentals, Inc. URI reported third-quarter 2022 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. The company has been gaining from the sustained demand in its end markets and the strength of its core rental business.

URI also lifted its full-year guidance for total revenues and adjusted EBITDA, given broad-based end-market activity, contractor backlogs, customer sentiment and solid visibility.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Fastenal Company (FAST) : Free Stock Analysis Report
 
Beacon Roofing Supply, Inc. (BECN) : Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
 
United Rentals, Inc. (URI) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research