Zacks Investment Research downgraded shares of DR Horton Inc. (DHI) from OUTPERFORM to NEUTRAL on September 12, 2013, with a target price of $20.00.
We are downgrading our recommendation on D.R. Horton from Outperform to Neutral following mixed results for fiscal third-quarter 2013. The company's third-quarter earnings of $0.42 per share beat the Zacks Consensus Estimate by 20% and the year-ago adjusted earnings by 90.9%. The earnings upsurge was driven by a litigation related reimbursement, solid pricing and margin improvement which made up for soft net orders. Homebuilding revenues missed the Zacks Consensus Estimate by 6.3%, due to slower order growth in the later half of the year following higher mortgage rates. However, pricing gains, lower incentives/discounts and better fixed cost leverage boosted profits in the quarter. Despite improving profits, we prefer to remain on the sidelines until we see a rebound in volumes. Moreover, recent increases in mortgage rates, changes in federal lending procedure and lack of overall economic recovery could hurt demand for new homes.
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