D.R. Horton Falls After Builder’s Profit Trails Estimates

D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, fell in New York trading after reporting a quarterly profit that missed analyst estimates.

Net income was $35.7 million, or 11 cents a share, in the three months ended Sept. 30, compared with a loss of $8.9 million, or 3 cents, a year earlier, the company said in a statement today. Analysts expected a profit of 15 cents a share, the average of 12 estimates in a Bloomberg survey.

D.R. Horton, based in Fort Worth, Texas, has been lowering costs and shifting its focus to move-up buyers as the U.S. housing market struggles to recover from a five-year slump in prices. The company’s fiscal fourth-quarter orders rose 6.6 percent from a year earlier, when sales were hurt by the expiration of a homebuyer tax credit. The growth was less than some analysts expected as market share declined, said Michael Widner, an analyst with Stifel Nicolaus & Co. in Baltimore.

“As conditions change -- tax credit gone, competitors coming to grips with market realities -- we expected some of those share gains might erode,” Widner, who rates D.R. Horton “hold,” said in a note to investors today. “It appears to us they did.”

D.R. Horton dropped 1.7 percent to $11.46 at the close in New York. It was the biggest loser in the 12-member Standard & Poor’s 1500 Homebuilding Index, which climbed 1.3 percent. The company’s shares have lost 3.9 percent this year, compared with a 13 percent decline in the S&P gauge.

New-Home Slump

U.S. sales of new houses have slumped as foreclosures, tighter lending standards and an unemployment rate around 9 percent depress demand. New homes sold at an annual pace of 313,000 in September, the Commerce Department reported Oct. 26, putting this year on course to be the slowest in records dating to 1963. The previous low was in 2010, when 323,000 homes sold.

D.R. Horton’s fiscal fourth-quarter homebuilding revenue increased to $1.07 billion from $925.7 million a year earlier.

Orders rose to 4,241 homes from 3,979 a year earlier. The company’s sales order backlog, an indicator of future revenue, climbed to 4,854 homes worth $1 billion, from 4,128 homes worth $850.8 million a year earlier.

Orders and operating margins in the fiscal fourth quarter were “modestly” below expectations, while impairments on land were bigger than estimates, Michael Rehaut, an analyst at JPMorgan Chase & Co., wrote in a note to clients. He expected a 12 percent increase in orders.

The year-earlier orders were hurt by the expiration of a tax credit worth as much as $8,000 for first-time homebuyers. The incentive required contracts be signed by April 30, pushing many transactions to earlier in the year.

The fourth-quarter results included about $12.8 million in pretax charges related to inventory impairment costs and write offs of land options, compared with $30.8 million a year earlier. Rehaut had estimated that such expenses would total $8 million, according to his note.

To contact the reporters on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net; Prashant Gopal in New York at pgopal2@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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