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Yamil Berard
Yamil Berard
Articles (173) 

Horton vs. Lennar, Who's Bigger?

Shares of America's largest homebuilding companies were up while Horton bested earnings and revenue forecasts

April 26, 2018 | About:

It was a satisfying quarter for the Fort Worth-based company that bills itself as “America’s Builder.”

Shares of D.R. Horton (NYSE:DHI) climbed in afternoon trading after the home builder reported second-quarter earnings. The builder beat the Street’s top-line estimates by 5 cents. Horton reported 91 cents per diluted share on revenue of $351 million, compared to 60 cents a share on revenues of $229.2 million a year ago. It was a 53% jump in profits.

Investors, by late afternoon, nodded in approval, raising the stock price 1.2% to $45.47 per share.

Horton held the title of the nation's largest builder for over 15 years until last fall. In October, Lennar Corp. (NYSE:LEN) merged with CalAtlantic Group, another homebuilding company, to become the largest homebuilding company in the U.S.

By market capitalization, the two companies are neck-and-neck, according to the new industry overview pages on the GuruFocus website that compares the financial metrics of companies within the same sector. Lennar has captured 20.6% of the homebuilding and construction industry, while D.R. Horton has 20.2%. .

Horton's market cap is $17.09 billion, while Lennar's is $17.45 billion.

Lennar said its merger with CalAtlantic Group would allow it to control or own about 250,000 home sites and be actively selling homes in 1,500 residential communities in 21 states. In the size of its revenues, Lennar easily surpasses Horton, records show.

D.R. Horton has operations in 79 markets in 26 states. It said it closed 48,731 homes in the 12-month period ended March 31.

Horton has a price-earnings ratio of 17.04 compared to 14.48 for Lennar. The industry average is 18.44.

The Shiller price-earnings ratio for Lennar is 50.03 versus that of Horton’s 122.63.

In price-book, Horton posted 2.16 while Lennar posted 1.36. The industry average is 2.16.

Horton financial figures

In a morning earnings release, Horton said net sales increased 13% in value to $4.7 billion and 13% in homes to 15,828.

It also announced it was increasing guidance for 2018 for a consolidated pre-tax profit margin to a range of 12.1% to 12.3%.

It expects cash flows from operations to hit at last $800 million, excluding Forestar Group Inc. (NYSE:FOR), one of its subsidiaries.

The figures reflect the quarter ending March 31.

Horton shares are up 37% over the last year of trading.

Long-term yields

The Fort Worth-based company has seen its market cap balloon to more than $15.9 billion from $4 billion a decade ago.

Horton reported net income of more than $1 billion in 2017. Its long-term debt over the trailing 12 months is $3.26 billion and it has free cash flow of $278 million.

Revenue stood at $3.3 billion in December 2017, preliminary figures showed.

Horton has a Piotroski F-Scre of 5, which usually implies the company's financial situation reflects stability.

Lennar

The homebuilder surpassed earnings as well as revenue expectations in the first quarter of the year. It released earnings earlier this month. The financials reflected the merger with CalAtlantic Group, which closed on Feb. 12.

GuruFocus shows it has a Piotroski F-Score of 3, which usually implies poor business operations.

Revenue was $13 billion in November 2017. The company had an operating income of $1.3 billion. And its long-term debt stood at nearly $8 billion.

Net income was $772 million in November 2017 and free cash flow was $885 million.

Its stock has gained 8% over the last 12 months. In Thursday trading, Lennar was at $54.29 a share, up 0.38%.


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