D.R. Horton earnings beat estimates but stock price declines

Fort Worth-based D.R. Horton reported fiscal first-quarter earnings that beat analyst estimates as sales increased, but its stock price fell after new order growth came in softer than expected.

Net income for the three months ended Dec. 31 climbed to $157.7 million, or 42 cents a share, from $142.5 million, or 39 cents, a year earlier, the company said in a statement Monday. The average estimate of 16 analysts was 41 cents a share, according to data compiled by Bloomberg.

Homebuilding revenue rose to $2.4 billion in the first quarter from $2.3 billion a year earlier, and home sales completed in the quarter climbed 1 percent to 8,061.

“It was a good first quarter. And what we’re seeing going into January gives us a lot of confidence,” Horton’s CEO David Auld said during a conference call with analysts.

Orders rose 9 percent, compared with a 35 percent jump a year earlier, the company said. Analysts had been expecting sale growth of 12.5 percent, according to Bloomberg.

“It wasn’t a bad earnings report, in our view, but if investors are worried about the economy, the slowdown in order growth may be worrying to people,” said Megan McGrath, an analyst with MKM Holdings. McGrath said in an e-mail.

On Wall Street, Horton shares (ticker: DHI) sank $1.31, or nearly 5 percent, to close at $26.40.

D.R. Horton has focused on keeping costs down and boosting sales volumes in existing communities and its entry-level Express brand, which the company plans to expand this year to most of its 79 markets.

“The fact that they’re so diligent in cost controls is big for them,” said Drew Reading, a homebuilding analyst, in an interview before the results were released. “If there’s going to be another leg in the recovery, it’s going to be in the entry level, and they’ve been out in front of everyone on that.”

On the conference call, Auld said the company has seen positive sales trends in January, with particular strength in North Texas.

He said he recently spent a couple of weeks driving around the Dallas-Fort Worth market, and told Chairman Donald Horton that he had to get out of the field “because if I stayed in Dallas and Fort Worth, I would become way to aggressive buying land. It is a go-to-market.”

In Houston, he said, “I think there’s a lot of conversation, a lot of uncertainty, a lot of volatility within the oil and gas business, which, I think, is making people more conservative about buying homes.”

Overall, the U.S. housing recovery appeared to lose momentum toward the end of 2015. New-home construction unexpectedly dropped in December, falling 2.5 percent to a 1.15 million annualized rate, according to the Commerce Department.

This story was originally published January 25, 2016 at 9:32 AM with the headline "D.R. Horton earnings beat estimates but stock price declines."