DR Horton Inc. (DHI) reported a net loss of 45 cents per share for the third quarter of fiscal 2009, compared to the Zacks Consensus Estimate of a loss of 27 cents per share. However, the net loss reported in the quarter was smaller than the loss of $1.26 reported in the same period a year ago.
The year-over-year earnings improvement was driven by higher gross margin on home sales and a lower charge taken for inventory impairments and land option cost write-offs. The company reported home sales gross profit margin of 11.3%, a 120 basis point increase from the 10.1% reported a year ago.
Quarterly homebuilding revenue was $914.1 million on 4,240 homes closed, compared to approximately $1.4 billion on 6,167 homes closed in the comparable quarter of fiscal 2008. Land and lot sales totaled $17.5 million, compared to $18.3 million in the prior-year quarter.
Net sales orders in the quarter (which reflect homes to be closed in the future) were 5,089 homes ($1.1 billion) compared to 5,501 homes ($1.2 billion) last year. The company had a sales order backlog of 5,430 homes ($1.1 billion) as on June 30, 2009, compared to 8,281 homes ($1.9 billion) as on June 30, 2008.
The cancellation rate (cancelled sales orders divided by gross sales orders) for the reported quarter was 26%, which is way above the historical range of 10%–14%.
With rising foreclosures, high inventory levels, tighter credit markets and weak consumer confidence, demand conditions in the homebuilding industry continue to be challenging. The company is responding by reducing future starts, cutting costs, and staying away from land investments.
However, we do not see any signs of recovery for the homebuilding industry in the near term. We expect the company to post negative earnings for the next couple of quarters.
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