Despite a rise in revenue and sales orders, Fort Worth-based home builder D.R. Horton saw a decline in profits in its third fiscal quarter due to $54.7 million in pretax charges because of a weak housing market in the Chicago area, the company said.
Net income declined 22.5 percent in the three months ended June 30 to $113.1 million, or 32 cents a diluted share, compared with $146 million, or 42 cents a diluted share, in the same quarter a year ago.
The earnings came in below analysts’ expectations of 49 cents per share. Home building revenue in the quarter rose 28 percent to $2.1 billion.
Donald Tomnitz, Horton’s chief executive, told Wall Street analysts on Thursday that the company stands in a “strong competitive position,” and that its market share “is the largest in company history.” But, he said, demand for new homes is only “stable.”
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Tomnitz said mortgage underwriting standards “are still too high” and need to moderate for home building to take off.
However, “the biggest impediment is job growth,” Tomnitz said. People “are not looking for houses, they’re looking for full-time jobs. Permanent jobs and better-paying jobs. Job, jobs, jobs is what grows our industry,” he said.
Shares of Horton (ticker: DHI) closed down $2.86 a share to $21.94 Thursday.
Sales orders in the quarter increased 25 percent to 8,551 homes, and homes closed increased 19 percent to 7,676. The company reported a sales order backlog at the end of June of 11,365 homes, a 15 percent increase from a year ago.
The average sale price of a D.R. Horton home in the quarter was $272,300, up 8 percent. The average sale price of its new Express brand of homes was $156,000, the company said. Express is targeting entry-level buyers and is now offered in 22 markets in eight states.
In the Chicago area, sales and returns performed below management expectations, the company said.
The Chicago communities “were purchased from 2004 and 2007 and had been previously impaired,” the company said. “During the quarter, the company took actions to increase sales pace, reduce inventories and improve cash flows and returns in these communities which resulted in these impairment charges.”
During the quarter, Horton bought the home-building operations of Atlanta-based Crown Communities for $210 million.