Homebuilder DR Horton Inc. (DHI) is slated to announce its fourth-quarter results before the market opens Friday. Analysts are of the view that the company's quarterly loss per share would narrow significantly from last year while they forecast a year-over-year decline in revenues.
Founded in 1978 by Donald Horton, D.R. Horton, builds single-family homes in 83 markets, in 27 states. The Fortune 500 company's headquarters are located in Fort Worth, Texas. The company was ranked as the largest homebuilder by units sold in the US since 2003.
On average, analysts polled by Thomson Reuters expect the company to report a loss of $0.24 per share for the fourth quarter on revenues of $1.11 billion. Analysts' forecast typically excludes one-time items.
For the year-ago fourth quarter, the company had posted a loss of $2.53 per share on revenues of $1.78 billion. Net loss applicable to common shares was $799.80 million in last year's fourth quarter.
The Commerce Department has released a report on Wednesday showing an unexpected decrease in housing starts for the month of October. The report said that housing starts fell 10.6% to an annual rate of 529,000 in October from the revised September estimate of 592,000. A notable decrease in the construction of new multi-family homes contributed to the unexpected decrease, with the rate for buildings with five units or more falling 33.3% to 48,000. Single-family starts also fell 6.8% to an annual rate of 476,000, the Department said.
The drop has surprised economists, who had expected starts to edge up to 600,000 from the previous month's initial estimate of 590,000. Analysts pointed out that the decline came at a time when homebuilders where still facing the imminent expiration of the first-time homebuyers tax credit.
Meanwhile, RealtyTrac, an online marketplace of foreclosure properties, last month said that foreclosure filings in the third quarter increased 23% from the year-ago period, and were up 5% from the previous quarter. Releasing its U.S. Foreclosure Market Report for the third quarter of 2009, RealtyTrac said one in every 136 U.S. housing units received a foreclosure filing during the quarter, which is the highest quarterly foreclosure rate since the firm began issuing its report in the first quarter of 2005.
For the sequential third quarter, DR Horton reported a narrower loss, helped by lower charges and a benefit from provision for income taxes. Net loss reached $142.3 million or $0.45 per share, compared with a net loss of $399.3 million or $1.26 per share in the year-ago quarter.
However, the company's third-quarter revenues declined year-over-year reflecting lower home sales and weak net sales orders as market conditions in the homebuilding industry are still challenging. Homebuilding revenue totaled $914.1 million in the third quarter, down from $1.4 billion in the same quarter of fiscal 2008. Home sales declined to $896.6 million from $1.42 billion a year ago. Land/lot sales were $17.5 million, slightly lower than $18.3 million reported in the same period last year.
During the third quarter, DR Horton closed 4,240 homes, compared with 6,167 homes in the year-ago quarter. As of June 30, 2009, the company's sales order backlog of homes under contract was 5,430 homes, down from 8,281 homes as at June 30, 2008. Net sales orders declined to 5,089 homes from last year's 5,501 homes. Cancellation rate was 26% in the third quarter.
At the time of the third-quarter results announcement, Donald Horton, chairman of DR Horton's Board, had said, "Market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, tight credit for homebuyers and weak consumer confidence."
Among peers in the sector, KB Home (KBH) recently reported a narrower loss for the third quarter of fiscal 2009, helped by lower expenses and cancellation rate as well as an increase in net orders. Net loss narrowed to $66.05 million or $0.87 per share from $144.75 million or $1.87 per share in the prior year. Revenues for the quarter declined to $458.45 million from $681.61 million in the previous year, as housing revenues dropped due to a 20% decrease in homes delivered and a 15% decline in the average selling price, compared to the previous year.
KB Home's home Building revenues dropped to $456.35 million from $679.12 million in the prior year. Net orders were up 62% at 2,158 compared to 1,329 in the third quarter of 2008, with each of KB Home's geographic regions experiencing year-over-year net order growth. The company attributed the growth in net order to the new product line, the Open Series, and a lower cancellation rate.
Looking ahead, KB Home said that the market ''remains in a transition where it will likely be some time before we see meaningful improvement in the economic conditions that are essential to our industry's future growth.''
Another rival, Lennar Corp.'s (LEN,LEN.B) third-quarter loss widened from last year, hurt by write-downs and charges and a sharp decline in revenues. The company's net loss for the quarter was $171.61 million or $0.97 per share, compared with a net loss of $88.96 million or $0.56 per share, a year ago. Total revenues declined to $720.73 million from $1.11 billion in the prior-year quarter, reflecting a decrease in the number of home deliveries and average selling price in the quarter.
Lennar's homebuilding revenues reached $643.61 million, down from $1.02 billion in the previous year. Revenues from home sales decreased 36% in the third quarter to $635.27 million, primarily due to a 28% decrease in the number of home deliveries, excluding unconsolidated entities, and a 12% decrease in average sales price.
However, Lennar believes that it would return to profitability in fiscal 2010, helped by improved sales environment, increasing pre-impairment gross margins and the ability to leverage S,G&A, assuming the economy continues to stabilize.
DHI closed Thursday's trading at $12.25, down $0.12, on a volume of 10.27 million shares. For the 52-week period, the company's trading range was $3.79 - $13.90.
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