DR Horton Inc. (DHI) reported net income of $35.7 million or 11 cents per share in the fourth quarter of fiscal 2011 versus a net loss of $8.9 million or 3 cents per share in the year-ago quarter.
Reported earnings per share included a pre-tax charge of $12.8 million associated with cost of sales for inventory impairments and land option cost write-offs and $0.1 million loss on early retirement of debt compared with inventory impairments and land option cost write-off charges of $30.8 million and a gain of $1.8 million on early retirement of debt in the year-ago quarter.
Excluding these items, adjusted earnings of the company was $48.6 million or 15 cents per share compared with $20.1 million or 6 cents per share in the fourth quarter of 2010. Earnings per share were at par with the Zacks Consensus Estimate.
Total revenues increased 15.8% year over year to $1.10 billion, driven by improved performances across both the operating segments. Reported revenues exceeded the Zacks Consensus Estimate of $1.07 billion.
Homebuilding revenues climbed 16.0% year over year to $1.07 billion, on the back of improved home sales. Revenues from financial services came in at $24.2 million, up 6.6% year over year.
Home sales increased 16.6% year over year to $1.07 billion, driven by a 16.5% growth in home closings to 4,987 homes in the reported quarter compared with 4,281 homes a year ago. On the other hand, land sales contributed $400,000 to revenues compared with $4.6 million in the prior year.
Net sales orders in the fourth quarter totaled 4,241 homes, valued at $927.6 million, compared with 3,979 homes, amounting to $817.5 million in the year-ago quarter. Order cancellation rate fell to 29% during the quarter from 31% in the previous-year quarter. The quarter-end backlog rose 17.6% to 4,854 homes amounting to $1.04 billion from 4,128 homes valuing $850.8 million at the end of fourth quarter of 2010.
DR Horton’s homebuilding cash, cash equivalents and marketable securities totaled $1.06 billion as of September 30, 2011 compared with $1.63 billion as of September 30, 2010. Homebuilding notes payable decreased to $2.57 billion at the end of the fourth quarter of fiscal 2011 from $3.18 billion at the end of the corresponding quarter in fiscal 2010.
In the reported quarter, the company repaid the remaining $106.1 million (principal amount) of its 7.875% senior notes post maturity. Further, the company also repurchased $77.1 million (principal amount) of its outstanding senior notes.
During the quarter, the company’s board of directors announced a quarterly cash dividend of 3.75 cents per share, payable on December 13, 2011 to shareholders of record at the close of business on December 02, 2011.
Annual Results
Net income for the fiscal year stood at $71.8 million or 23 cents per share including pre-tax charges of $45.4 million related to inventory impairments and land option, a loss of $10.8 million on early retirement of debt and a tax benefit of $59.7 million. Excluding these items, adjusted net income of DR Horton was $68.3 million or 21 cents per share, comprehensively missing the Zacks Consensus Estimate of 27 cents per share.
Total revenue for fiscal 2011 was $3.64 billion and ahead of the Zacks Consensus Estimate of $3.60 billion. Homebuilding revenues were $3.55 billion and financial services revenues were $87.2 million.
Our Take
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 a deteriorating home demand, DR Horton is attempting to streamline supply with demand through attractive incentive schemes.
Further, the company has also managed to execute aggressive land purchasing plans even 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 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.
