D.R. Horton finishes strong year with double-digit sales, profit growth

Fort Worth-based home builder D.R. Horton finished off a strong year, reporting a $166.3 million profit Tuesday for its fiscal fourth quarter as growing sales reflected the housing market’s recovery.

Net income grew by 19 percent, to 45 cents a share, compared to $139.5 million, or 40 cents a diluted share, in the same quarter a year ago. Home building revenues rose 33 percent to $2.4 billion in the quarter.

Moreover, sales orders for the three months ended Sept. 30 increased 38 percent to 7,135 homes, while closings rose 25 percent to 8,612 homes. Much of the increase is attributable to its new Express brand of homes, which is targeting entry-level buyers, a market the company said is underserved. Express is now available in 24 markets in eight states, including Texas.

The company said it has also offered incentives in slower markets to boost sales. But Texas has stayed strong in terms of higher sales and orders at a time when the inventory of existing homes for sale is low. In Tarrant County, for example, the existing home inventory stood at just a two-month supply.

In addition to its Horton brand, the company builds a luxury brand called Emerald, which produced 17 percent of its revenues. That brand is now offered in 34 markets in 14 states.

David Auld, named last month to replace retiring Donald Tomnitz as president and chief executive officer, said in his first earnings call with Wall Street analysts that the company expects more double-digit growth in fiscal 2015.

The company also expects closings to increase between 20 percent and 30 percent in the new year. As of Sept. 30, the company’s sales order backlog was 9,888 homes, compared to 8,205 homes at the same time last year.

“We find the market to be relatively stable,” Auld said. “We feel good about where we are in the market. We should have a great three- to five-year run.”

Horton missed analysts estimates of 49 cents a share based on lower-than-expected home closings, said Jay McCanless with Sterne Agee in a research note.

“But pricing growth, order growth and profitability exceeded our expectations,” he said. “It appears (Horton’s) strategy shift to higher volumes worked.”

Shares of Horton (ticker: DHI) closed up 52 cents at $23.95 on the New York Stock Exchange.

Horton closed its books on fiscal 2014 reporting a profit of $533.5 million, or $1.50 a share, compared to $462.7 million, or $1.33 cents a share, for fiscal 2013. Homebuilding revenue for the fiscal year increased 29 percent to $7.9 billion.

Auld, who has been at the helm for about six weeks, said he’s still getting used to his new public role. He previously was chief operating officer after serving as a regional vice president for eight years. Tomnitz had been with Horton for 31 years.

“I’m a behind-the-curtains kind of guy. This is different for me,” said Auld, who thanked Tomnitz “for his leadership, advice and support over the years.” Tomnitz will continue to consult with the company.