DR Horton Inc. (DHI) reported net income of $28.7 million or 9 cents per share in the third quarter of fiscal 2011, significantly lower than $50.5 million or 16 cents per share reported in the year-ago quarter.
However, excluding pre-tax charges of $9.9 million associated with cost of sales for inventory impairments and land option cost write-offs and a $6.5 million loss on early retirement of debt, the company’s net income stood at $45.1 million or 14 cents per share, comprehensively beating the Zacks Consensus Estimate of 6 cents per share.
Homebuilding revenues dropped 29.2% year over year to $975.4 million, driven by depressed home sales. Revenues, however, failed to meet the Zacks Consensus Estimate of $997 million.
Home sales fell 29.3% year over year to $974.5 million, driven by a 33.1% decrease in home closings to 4,555 homes in the reported quarter from 6,805 homes a year ago. On the other hand, land sales contributed $900,000 to revenues compared with $1,000,000 in the prior year.
Net sales orders in the third quarter totaled 4,874 homes, valued at $1.07 billion, compared with 4,921 homes, valued at $1.03 billion in the year-ago quarter. Order cancellation rate plunged to 27% from 28% in the previous year. The quarter-end backlog rose 26.4% to 5,600 homes totaling $1.18 billion, from the prior-year backlog of 4,430 homes totaling $954.4 million.
DR Horton’s homebuilding cash, cash equivalents and marketable securities totaled $1.17 billion at the end of the third quarter of fiscal 2011 compared with $1.63 billion at the end of the fourth quarter of fiscal 2010. Homebuilding notes payable decreased to $1.76 billion as of June 30, 2011 from $2.09 billion as of September 30, 2010.
In the reported quarter, the company repurchased 3,544,838 shares of its common stock for $38.6 million, reflecting an average price of $10.89. Moreover, the company also repaid the remaining $70.1 million (principal amount) of its 6% senior notes post maturity. Further, the company also redeemed the remaining $112.3 million (principal amount) of its 5.375% senior notes due 2012.
During the quarter, the company’s Board of Directors announced a quarterly cash dividend of $0.0375 per share, payable on August 24, 2011 to shareholders of record at the close of business on August 12, 2011.
Texas-based DR Horton Inc. is one of the largest national homebuilder, primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets. Amid deteriorating home demand, DR Horton is attempting to align supply with demand through attractive incentive schemes.
Further, the company has also managed to execute aggressive land purchasing plans during the economic downturn to capitalize on the availability of cheap lots at vital locations, which would have been expensive in a normal market.
However, higher home mortgage foreclosures has increased supply and pulled back prices, thereby making the purchase of a foreclosed home an attractive alternative than buying a new home. This has increased competition and reduced the chances of implementing a price rise for residential properties.
Keeping these in mind, the shares of DR Horton Inc. are maintaining a Zacks #3 Rank, which translates into a short-term Hold rating. Alongside, the shares also have a Neutral recommendation over the long term.
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