D. R. Horton Inc. Earnings Cheat Sheet: Margins Shrink on Rising Costs

S&P 500 (NYSE:SPY) component D. R. Horton Inc. (NYSE:DHI) reported its results for the fourth quarter. D.R. Horton is a homebuilding company that constructs and sells homes in the United States and provides mortgage financing and title agency services to homebuyers.

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D. R. Horton Earnings Cheat Sheet for the Fourth Quarter

Results: Reported a profit of $35.7 million (11 cents per diluted share) in the quarter. D. R. Horton Inc. had a net loss of $8.9 million or a loss 3 cents per share in the year earlier quarter.

Revenue: Rose 8% to $1.07 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: DHI fell short of the mean analyst estimate of 15 cents per share. Analysts were expecting revenue of $1.08 billion.

Quoting Management: Donald R. Horton, Chairman of the Board, said, “Our strategy to open new communities for first-time and move-up buyers, improve gross margins, adjust our overhead and reduce interest expense led to our second consecutive year of profitability, despite continued challenging market conditions. In fiscal 2011, we reduced our homebuilding SG&A expense by $43 million and our homebuilding interest expensed directly and amortized to cost of sales by $67 million.”

Key Stats:

A year-over-year revenue increase last quarter snaps a streak of four consecutive quarters of revenue declines. The worst quarter in that span was the first quarter, which saw a 30.4% decrease.

Gross margin shrank one percentage point to 14.9%. The contraction appeared to be driven by increased costs, which rose 14.5% from the year earlier quarter while revenue rose 13.2%.

The company fell short of estimates last quarter after beating the mark the quarter before with net income of 9 cents versus a mean estimate of net income of 5 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the first quarter of the next fiscal year has fallen from 8 cents per share to 7 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. For the fiscal year, the average estimate has moved up from 25 cents a share to 27 cents over the last sixty days.

Competitors to Watch: PulteGroup, Inc. (NYSE:PHM), KB Home (NYSE:KBH), Lennar Corporation (NYSE:LEN), Toll Brothers, Inc. (NYSE:TOL), The Ryland Group, Inc. (NYSE:RYL), NVR, Inc. (NYSE:NVR), M.D.C. Holdings, Inc. (NYSE:MDC), Standard Pacific Corp. (NYSE:SPF), Orleans Homebuilders (OHBIQ), and Meritage Homes Corporation (NYSE:MTH).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)