D.R. Horton (DHI) Soars to a Six-year High

Shares of D.R. Horton (DHI), the largest U.S homebuilder by volume, soared to a six-year high last week after the company reported second quarter profit that handily topped analyst expectations. For its second quarter, the Fort Worth, Texas-based company earned $0.32 per share, or $111 million, up from the $0.13, or $40.6 million, it reported in the prior year quarter. Analysts had expected the company to earn $0.19 per share.

Meanwhile, D.R. Horton's homebuilding revenue, which does not include its financing arm, rose to $1.39 billion, up from $935.6 million in the previous year. Daily Chart
The company sold 5,643 homes, up from 4,240 in the prior year quarter, while order for new homes rose to 7,879, up from 5,899. The company attributed its strong sales to an improving housing market, fueled by stronger employment options, and buffered by low fuel costs. Low mortgage rates and a declining inventory of existing homes are contributing to the rising rate of construction across the country. CEO Donald J. Tomnitz stated, "The first half of fiscal year 2013 was nothing short of phenomenal, and we expect the second half to be even better." Tomnitz's optimistic view is backed by recent data from the U.S. Commerce Department, which stated that new single family homes sold at an annual pace of 417,000 in March, concluding the housing industry's busiest quarter since 2008. Those bright macro figures also contributed to stronger than expected results from D.R. Horton's rivals, PulteGroup (PHM) and Ryland Group (RYL). However, D.R. Horton is a standout industry performer, gaining 35% since the beginning of this year, compared to an 18% gain in its S&P Supercomposite Homebuilding Index. Looking forward, D.R. Horton is expected to now focus on growing profitability and not total orders, considering the current size of its order backlog. The key to this will be lower costs, which the company is attempting to achieve by buying up land ahead of its industry rivals. During the quarter, D.R. Horton spent $460 million on new land purchases during the quarter, when average land prices rose 14%. Analysts believe that D.R. Horton is on track to surpass its closest competitor, PulteGroup, in all financial aspects - profits, revenue and sales volume. If market conditions remain stable and in their upward trend, the company expects to continue raising prices to address rising demand in the United States. The company finished the quarter with 15,800 completed homes and 175,000 finished land lots in its inventory. Shares of D.R. Horton trade at 17.2 times forward earnings with a 5-year PEG ratio of 3.1. It pays a quarterly dividend of $0.15 - a 0.7% yield at current prices. Other News About DHI D.R. Horton Reaches a Six-Year High After Earnings Double D.R. Horton soars past its peers to hit a six-year high. Sales, Profits Surge at D.R. Horton as Homebuilder Has "Phenomenal" Quarter Can D.R. Horton keep rising on soaring demand for homes? Other Stocks in the News Should You Buy These Two Hard Drive Makers? Are Western Digital and Seagate undervalued growth stocks? Are These Two Giants Set to Merge? Will PepsiCo's Frito-Lay and Mondelez combine into a snack superpower? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Apr 29, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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