MW D.R. Horton offers mortgage-rate buydowns to spur demand, fueling a revenue beat

By Tomi Kilgore

Home builder's stock rallies toward longest win streak in over a year as earnings beat expectations even as orders missed

Shares of D.R. Horton Inc. were climbing in early Tuesday trading after the home builder reported fiscal first-quarter earnings that fell - but stayed well above expectations - as housing demand remained strong despite continued affordability challenges.

"Although the level of new and existing home inventories has increased from historically low levels, the supply of homes at affordable price points is generally still limited, and demographics supporting housing demand remain favorable," said Executive Chairman David Auld.

The stock $(DHI)$ climbed 4.2% in premarket trading toward a sixth straight gain. That puts it on track for the longest win streak since the eight-day stretch that ended Dec. 14, 2023.

Meanwhile, orders for homes surprisingly declined and the order backlog dropped. The company provided incentives to support demand, which helped revenue beat forecasts.

"Despite continued affordability challenges and competitive market conditions, incentives such as mortgage rate buydowns have helped to address affordability and spur demand," Auld said.

Orders for the quarter to Dec. 31 fell 1.3% to 17,837 homes from 18,069, as declines in the South Central, Southeast and Northwest regions of the U.S. offset increases in the Southwest, East and North regions.

The FactSet consensus was for orders to rise to 18,389. That marked the third straight quarter that orders missed Wall Street projections.

The value of orders fell 2% to $6.7 billion, missing the FactSet consensus of $6.89 billion.

The sales order backlog dropped 21% to 11,003 homes, and the value of those homes was down 21% to $4.3 billion. The company had 36,200 homes in inventory as of Dec. 31, of which 25,700 were unsold.

Total revenue for the latest quarter fell 1.5% from a year ago to $7.61 billion, well above the FactSet consensus of $7.01 billion.

Net income declined to $844.9 million, or $2.61 a share, from $947.4 million, or $2.82 a share. That beat the FactSet consensus for earnings per share of $2.35.

Looking ahead, the company affirmed its fiscal 2025 guidance for revenue of $36 billion to $37.5 billion.

The stock has dropped 20.7% over the past three months through Friday, as the current win streak started after it closed at a six-month low of $136.52 on Jan. 10. In comparison, the iShares U.S. Home Construction ETF ITB has lost 12.5% over the past three months and the S&P 500 index SPX has gained 2.4%.

-Tomi Kilgore

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January 21, 2025 07:49 ET (12:49 GMT)

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