- Earnings per Share (EPS): $4.10 per diluted share, up 5% from the prior year quarter.
- Consolidated Pretax Income: $1.8 billion, up 1% year-over-year.
- Revenue: $10 billion, up 2% year-over-year.
- Pretax Profit Margin: 18.1%.
- Cash Flow from Homebuilding Operations: $972 million for the nine months ended June 30.
- Consolidated Cash Flow: $228 million for the nine months ended June 30.
- Homebuilding Return on Inventory: 29.5% for the trailing 12 months ended June 30.
- Return on Equity: 21.5% for the trailing 12 months ended June 30.
- Home Sales Revenue: $9.2 billion, up 6% year-over-year.
- Homes Closed: 24,155 homes, up from 22,985 homes in the prior year quarter.
- Average Closing Price: $382,200, up 2% sequentially and 1% year-over-year.
- Net Sales Orders: Just over 23,000 homes, up 1% year-over-year.
- Order Value: $8.7 billion, flat year-over-year.
- Cancellation Rate: 18%, up from 15% sequentially.
- Gross Profit Margin on Home Sales: 24%, up 80 basis points sequentially.
- Homebuilding SG&A Expenses: Increased by 12% year-over-year, 7.1% of revenues.
- Homes in Inventory: 42,600 homes, down 3% year-over-year.
- Homebuilding Lot Position: Approximately 630,000 lots, 24% owned and 76% controlled.
- Rental Operations Pretax Income: $64 million on $414 million of revenues.
- Forestar Revenues: $318 million on 3,255 lots sold.
- Financial Services Pretax Income: $91 million on $242 million of revenues.
- Consolidated Liquidity: $5.8 billion, consisting of $3 billion of cash and $2.8 billion of available credit.
- Debt: $5.7 billion.
- Stockholders' Equity: $24.7 billion, book value per share $75.32, up 18% year-over-year.
- Return on Assets: 14.8% for the trailing 12 months ended June 30.
- Cash Dividends: $0.3 per share, totaling $99 million.
- Share Repurchases: 3 million shares for $441 million during the quarter.
- Fourth Quarter Revenue Guidance: $10 billion to $10.4 billion.
- Full Year Revenue Guidance: $36.8 billion to $37.2 billion.
Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- D.R. Horton Inc (DHI, Financial) reported earnings of $4.10 per diluted share, a 5% increase from the prior year quarter.
- Consolidated pretax income increased by 1% to $1.8 billion on a 2% increase in revenues to $10 billion.
- Home sales revenues increased 6% to $9.2 billion on 24,155 homes closed.
- The company generated $972 million of cash flow from homebuilding operations and consolidated cash flow of $228 million during the nine months ended June 30.
- D.R. Horton Inc (DHI) has a strong balance sheet with $5.8 billion of consolidated liquidity and a low leverage ratio of 18.8%.
Negative Points
- Cancellation rate for the quarter was 18%, up from 15% sequentially.
- Homebuilding SG&A expenses increased by 12% from last year, with SG&A as a percentage of revenues rising to 7.1%.
- Average price of net sales orders in the third quarter was flat sequentially and down 1% from the prior year quarter.
- Lot costs increased approximately 2.5% in the quarter, contributing to cost pressures.
- The company expects home sales gross margin to remain flat in the fourth quarter, indicating continued cost pressures and market challenges.
Q & A Highlights
Q: Your absorptions were somewhat worse than normal seasonality would suggest. Did you focus more on profitability per home versus maintaining the sales pace as rates rose in April? How are you thinking about seasonality in the fourth quarter?
A: We continue to balance price and pace to drive the returns we seek community-by-community. We saw choppiness in demand due to interest rate fluctuations and responded accordingly. We maintained incentives but didn't lean in too hard, resulting in a stable sales pace. We feel good about our position and backlog for the full year. - Paul Romanowski, President, CEO, Director
Q: In the Southeast and South Central regions, orders were lighter than expected. How are you thinking about existing home inventory in these markets, and did higher inventory negatively impact orders?
A: Inventory continues to increase, but we feel good about our competitive advantage, especially in our price points and with our incentive packages. The flatness in sales wasn't significantly impacted by increased inventory, and demand remains strong, though not as vibrant as in prior quarters. - Paul Romanowski, President, CEO, Director
Q: What is your long-term expectation for intra-quarter sales and closings, given normalized cycle times and a good amount of inventory heading into Q4 and next year?
A: We see choppy traffic patterns due to interest rate volatility. Buyers prefer homes closer to completion for better interest rates, resulting in a high level of homes sold and closed in the same quarter. We focus on maintaining a sufficient starts pace and homes in inventory to meet demand. - Paul Romanowski, President, CEO, Director
Q: Can you provide insight into the consumer's ability to qualify for loans, down payments, and credit quality?
A: Our buyers' credit metrics remain stable, with an average FICO score of 725. The only noticeable difference is the need for higher household income to qualify due to the interest rate environment. Our cancellation rate is at the low end of a comfortable range. - Jessica Hansen, Senior VP - Communications and People
Q: What are your expectations for lot cost trends in fiscal 2025?
A: We continue to see increases in lot costs, which we expect to remain a headwind. We anticipate lot cost inflation to be in the high single digits to low double digits. - Paul Romanowski, President, CEO, Director
Q: Can you discuss the health of your land banking pipeline and partners?
A: We have a strong pipeline of experienced land developers across the country. Despite some regional banks pulling back, we've helped developers find alternative capital sources. 64% of our closings this quarter were on lots developed by third parties. - Paul Romanowski, President, CEO, Director
Q: What are your expectations for the rental business in Q4, given the volatile environment for selling SFR and multifamily units?
A: Our rental business is included in our consolidated revenue guidance. There is some uncertainty around the timing of closings for rental deals, but this is built into our revenue range. - Michael Murray, COO, Executive VP
Q: Can you provide an update on the long-term plan for Forestar and its potential deconsolidation?
A: Forestar is a key part of our strategy, separately capitalized to support its growth. We expect them to continue raising capital and growing their platform. As they mature, we'll evaluate their capitalization and our investment. - Michael Murray, COO, Executive VP
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
