D.R. Horton, the largest U.S. homebuilder, reported weaker-than-expected growth in orders for new homes during its fiscal fourth quarter.
Home orders for the three months through September increased 3 percent from a year earlier to 8,744 homes, and the value of those deals rose 7 percent to $2.6 billion, the Fort Worth-based company said in a statement Tuesday.
Horton’s shares (ticker: DHI) fell more than 4 percent to $28.09 in late morning trading after earlier dropping 7.5 percent, which was the biggest intraday decline since January. D.R. Horton was the worst performer in an S&P index of homebuilders, which slipped 1.9 percent.
The recovery for new-home sales in the U.S. has been spotty as builders are pressured by labor shortages that have made it a challenge to meet demand. While D.R. Horton had strong profit margins for the quarter, investors will probably be concerned by the slow growth in orders, Megan McGrath, an analyst at MKM Holdings in Stamford, Connecticut, said in a note to clients.
“Order growth of 3 percent was well below our expectations of 13 percent growth,” McGrath said. “Although gross margins were strong, we expect low order growth could drive underperformance today in shares.”
Chief Executive Officer David Auld said the quarterly result for orders isn’t a signal that demand is weakening.
“It’s a fourth-quarter sales number — we just have a lot going on and a tough comp the year before,” Auld said during a conference call with analysts. “It put us right in where we thought we would be for the year. So if we look at October, October looks good.”
The company’s gross margin on home sales was 20.5 percent in the quarter, compared with 19.9 percent a year earlier. Homebuilding revenue rose 18 percent to $3.7 billion. The number of sales completed in the quarter climbed 16 percent to 12,247.
D.R. Horton said net income for the quarter was $283.6 million, or 75 cents a share, compared with $238.9 million, or 64 cents, a year earlier.
The company recorded charges including $15.4 million on the cost of sales, a goodwill charge of $7.2 million and legal and trademark costs. Without the charges, earnings per share would have been 81 cents, Jack Micenko, an analyst at Susquehanna International Group, said in a note to clients.