The builder’s order growth hit 19% after hitting 38% in the same quarter last year. That was below the UBS projection of 20% but above J.P. Morgan’s 17% estimate. The Southeast and Southwest showed the largest growth, hitting 40%. J.P. Morgan's Michael Rehaut estimated Horton’s gross margins (excluding charges) at 19.9%, which were in line with his projections.
“We note that results this quarter reflect DR Horton's operating acumen as well as its greater focus on spec construction, which allows for more even production,” Susan Maklari of UBS wrote.
Here are some other highlights from the quarter:
- Net sales orders increased 19% in homes to 8,477 and 22% in value to $2.5 billion
- Homes closed increased 23% in units to 10,576 and 27% in value to $3.1 billion
- Pre-tax income increased 35% to $338.8 million
- Pre-tax margin improved 60 basis points to 10.7%
- Net income increased 44% to $238.9 million or $0.64 per diluted share
- Net cash generated by operations was $511.8 million
In fiscal year 2015, Horton closed 36,648 homes and it has another 10,662 under contract, which bodes well for 2016.
“Looking to the future of the recovery, we continue to expect D.R. Horton will substantially outgrow the market given its focus on entry-level buyers with its Express series [nearly 20% of F3Q orders], as there's less competition among builders there, and spec construction, which allows it to better compete with existing homes,” Maklari wrote. “Further, we believe it is among the best operators in the group and has aligned its business to execute this plan. Finally, the company announced an 8% increase to its annual dividend, reflecting its ability to generate significant cash flow and financial flexibility.”