D.R. Horton reports fiscal 4Q profit
LOS ANGELES—D.R. Horton ended fiscal 2011 in the black for the second time in as many years, as the homebuilder cut costs aggressively in the face of fewer home sales.
The company also reported a return to profitability in the fourth quarter, aided by a 17 percent increase in home closings and a 7 percent bump new home orders.
The sales trends echo those of other major homebuilders, some of which have reported improved sales for the July to September quarter.
This year's numbers, however, are stacked up next to last year when tax credits aimed at spurring sales expired and sent demand down sharply.
Sales of new homes rose in September, according to the Commerce Department's most recent numbers, after four straight monthly declines, but only after builders cut their prices in the face of depressed demand. D.R. Horton was no exception.
While new home sales remain at levels well below what economists consider a healthy market, D.R. Horton has been able to eke out a profit by cutting costs, selling homes built on land it acquired at sharp discounts versus just a few years ago, paying down debt and focusing more on the pricier, move-up buyer.
President and CEO Don Tomnitz expects the company will be able to continue doing so next year, and forecast the builder will sell more homes in fiscal 2012 and turn in another full-year profit.
"We're selling at a pace in the first two months that will help us achieve those higher sales and closing targets for fiscal year `12," Tomnitz said, referring to October and November sales trends.
The executive noted he doesn't anticipate the U.S. economy, job growth or consumer confidence improving significantly in 2012, however.
"Right now, we're just planning on being more profitable on a similar number of closings and sales," he said.
Uncertainty over the U.S. economy, high unemployment and concerns that U.S. home prices have yet to hit bottom have kept many homebuyers on the sidelines this year. That led to a lackluster spring-and-summer peak homebuying season and has placed U.S. sales of new homes on track to be the worst on records dating to 1963.
The builder's profit margin on its home sales revenue for the fourth quarter and full year declined versus a year earlier, as the company boosted incentives and discounts.
Management said it needed to boost incentives this year, particularly in the first half, to entice buyers in the absence of a government incentive, but expects its profit margins will improve next year.
The company reported its net income for the three months ending Sept. 30 totaled $35.7 million, or 11 cents a share. That compares with a loss of $8.9 million, or 3 cents a share, in the same quarter last year.
The latest period was the builder's third consecutive profitable quarter.
Revenue rose 16 percent to $1.07 billion from $925.7 million.
Analysts polled by FactSet were expecting earnings of 14 cents a share on $1.08 billion in revenue.
D.R. Horton said net sales orders totaled 4,241, while homes closings were 17,421.
The builder noted that some 53 percent of its buyers are first-time homebuyers. That's down from 58 percent last year, as the company has stepped up efforts to target the move-up buyer market.
On a regional basis, D.R. Horton said sales trends in some Florida markets are doing very well. Texas, despite some slowing since last year, and Atlanta, also have been highlights, the company said.
Sales in California, however, remain weak and the builder expects them to remain that way for years.
The company ended the quarter with a backlog of 4,854 homes under contract, representing a value of $1 billion. That's an increase of 18 percent from a year earlier.
For the year, D.R. Horton's net income fell 71 percent to $71.8 million, or 23 cents per share. That compares with $245.1 million or 77 cents per share last year.
Revenue fell 18 percent to $3.55 billion from $4.31 billion.
For fiscal 2011, closings fell 20 percent from the year before, while new orders declined 10 percent.
D.R. Horton, which is based in Fort Worth, Texas, operates in 26 states and sells homes with prices ranging from $90,000 to more than $600,000. It was ranked the nation's largest builder last year on the basis of home closings by Builder magazine.
Shares of D.R. Horton Inc. fell 20 cents Friday, or 1.7 percent, to close at $11.46.