Home Sales and DR Horton Earnings Are Sending the Same Message About the Housing Market

1 year ago 140

Updated July 22, 2021 11:32 americium ET / Original July 22, 2021 9:13 americium ET

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Coming into Thursday, D.R. Horton shares were up astir 33% twelvemonth to date.

Daniel Acker/Bloomberg

Earnings from D.R. Horton and exiting location income information were released Thursday morning—and they’re some sending the aforesaid connection astir the lodging market.

Housing elephantine D.R. Horton reported better-than-expected fiscal third-quarter numbers Thursday morning. While the results and institution outlook were positive, investors reacted with caution.

Horton (ticker: DHI) earned $3.06 a stock connected $7.3 cardinal successful sales. Wall Street was looking for $2.80 successful per-share net connected $7.2 cardinal successful sales. It’s the company’s 10th consecutive quarterly net beat.

“The D.R. Horton squad delivered outstanding results successful the 3rd fiscal 4th of 2021, highlighted by EPS expanding 78%,” said Donald Horton, president of the board, successful a statement. “These results bespeak our experienced teams and accumulation capabilities, industry-leading marketplace share, wide geographic footprint and divers merchandise offerings crossed aggregate brands.”

Shares, however, were down astir 3% successful aboriginal Thursday trading, astatine $88.91.

Coming into Thursday, Horton shares were up astir 33% twelvemonth to date, amended than the comparable 16% and 14% respective gains of the S&P 500 and Dow Jones Industrial Average.

The company’s beardown first-half results were driven by an improving economy. Housing starts successful June, for instance, roseate astir 6% compared with May and astir 30% twelvemonth implicit year. The June starts fig besides exceeded economist projections.

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The institution sounds upbeat astir coming months, too. “Housing marketplace conditions stay precise robust, with location purchaser request exceeding our existent capableness to present homes crossed each of our markets,” the president said. “As our apical precedence is to consistently fulfill our commitments to our homebuyers, we person slowed our location income gait to much intimately align to our existent accumulation levels, portion gathering retired the infrastructure needed to enactment a higher level of location starts.”

The slowing location merchantability gait mightiness beryllium 1 crushed investors are reacting cautiously, though are astir apt not thing to beryllium disquieted about. June existing-home sales, reported Thursday morning, grew 1.4% compared with May and 23% compared with June 2020, though the annualized selling complaint of 5.86 cardinal homes missed expectations by a hair.

But determination doesn’t look to beryllium immoderate cardinal slowdown successful the lodging market. D.R. Horton besides reported Thursday that it had a current-home inventory of astir 47,000, up 55% from a twelvemonth ago. “The request for homes has acold exceeded D.R. Horton’s quality to nutrient homes,” explains Stephen Stanley, main economist astatine Amherst Pierpont. “So, the institution slowed its income pace.”

With that inventory, the institution present expects to make astir $27.9 cardinal successful income for its afloat fiscal year, an summation of astir $700 cardinal from guidance fixed successful April. With 1 4th near successful the company’s fiscal year, the guidance implies much than $8 cardinal successful fourth-quarter sales, amended than the Street’s existent projection of $7.7 billion.

The Thursday-morning banal weakness tin astir apt beryllium champion described arsenic a bull-market indicator. When things are good, the capitalist playbook advises to “sell the quality and bargain the dips.”

Write to Al Root astatine allen.root@dowjones.com

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