Company Performance - D.R. Horton (DHI) ended the recent trading session at $151.21, showing a -1.61% change from the previous day's closing price, underperforming the S&P 500's daily loss of 0.54% [1] - Shares of D.R. Horton have decreased by 4.62% over the past month, while the Construction sector lost 3.56% and the S&P 500 gained 1.5% during the same period [1] Upcoming Earnings Report - D.R. Horton is scheduled to release its earnings on January 21, 2025, with projected earnings of $2.41 per share, reflecting a year-over-year decline of 14.54% [2] - The consensus estimate anticipates revenue of $7.16 billion, indicating a 7.35% decrease from the same quarter last year [2] Full Year Projections - For the full year, the Zacks Consensus Estimates project earnings of $14.17 per share and revenue of $37.22 billion, representing changes of -1.19% and +1.15% respectively from the prior year [3] Analyst Estimates and Rankings - Recent modifications to analyst estimates for D.R. Horton indicate changing near-term business trends, with positive revisions suggesting optimism about the company's outlook [4] - The Zacks Rank system currently rates D.R. Horton as 5 (Strong Sell), with the Zacks Consensus EPS estimate having moved 2.61% lower in the past month [6] Valuation Metrics - D.R. Horton has a Forward P/E ratio of 10.85, which is higher than the industry average Forward P/E of 9.02, suggesting that D.R. Horton is trading at a premium [7] - The company holds a PEG ratio of 0.57, compared to the industry average PEG ratio of 0.69, indicating a relatively favorable valuation in terms of expected earnings growth [8] Industry Context - The Building Products - Home Builders industry, which includes D.R. Horton, has a Zacks Industry Rank of 144, placing it within the bottom 43% of over 250 industries [9]

Group 1 - The homebuilding market is viewed positively, with a specific mention of D.R. Horton, Inc. as a noteworthy company in this sector [1] - Crude Value Insights focuses on cash flow and companies in the oil and natural gas sector, highlighting their value and growth prospects [1] Group 2 - Subscribers to the service gain access to a stock model account with over 50 stocks and in-depth cash flow analyses of exploration and production firms [2] - The service includes live chat discussions about the oil and gas sector, enhancing community engagement [2]

Core Viewpoint - D.R. Horton reported disappointing fourth-quarter fiscal 2024 results, with earnings and revenues missing estimates and declining year-over-year, primarily due to high mortgage rates and buyer hesitancy [2][3][5]. Earnings and Revenue Summary - Adjusted earnings for Q4 were $3.92 per share, missing the Zacks Consensus Estimate of $4.20 by 6.7% and down 11.9% from $4.45 a year ago [5]. - Total revenues were $10 billion, a decrease of 4.8% year-over-year, and below the expected $10.2 billion [5]. - Homebuilding revenues increased slightly by 1.8% to $8.95 billion, while home sales rose 1.7% to $8.93 billion [7]. Margin and Profitability - The consolidated pre-tax profit margin was 17.1%, down from 19.2% a year ago [6]. - Homebuilding pre-tax margin for fiscal 2024 was 16.1%, contracting by 50 basis points from fiscal 2023 [11]. Segment Performance - Financial Services revenues increased by 1.1% to $222 million, while the Rental business generated $704.8 million, down from $1.39 billion a year ago [9][10]. - The order backlog at the end of fiscal 2024 was 12,180 homes, down 20% year-over-year, with a backlog value of $4.8 billion, down 19% [8]. Financial Position - Cash, cash equivalents, and restricted cash totaled $4.54 billion as of September 30, 2024, up from $3.9 billion at the end of fiscal 2023 [12]. - Total liquidity was $7.6 billion, with $3.1 billion available on the revolving credit facility [12]. Shareholder Returns - D.R. Horton increased its quarterly dividend by 33% to 40 cents per share, reflecting a commitment to disciplined capital allocation [4]. - The company repurchased 3.4 million shares for $561.2 million in Q4, with a remaining stock repurchase authorization of $3.6 billion [14]. Fiscal 2025 Guidance - The company expects consolidated revenues between $36 billion and $37.5 billion for fiscal 2025, with homes closed anticipated between 90,000 and 92,000 units [15]. Market Position and Outlook - D.R. Horton is positioned to benefit from limited affordable home supply and favorable demographics, despite current market challenges [3][4]. - Estimates for the stock have trended downward, leading to a Zacks Rank of 5 (Strong Sell) [19].

Financial Performance - Consolidated revenues increased 4% to $36.8 billion compared to $35.5 billion in the prior year[215] - Net income attributable to D.R. Horton was $4.8 billion compared to $4.7 billion in the prior year[219] - The company reported net cash provided by operating activities of $2.2 billion in fiscal 2024, down from $4.3 billion in fiscal 2023[350] - D.R. Horton, Inc. reported total revenues of $33,756.1 million for the year ended September 30, 2024, with a net income of $4,148.9 million[366] - The company's total assets amounted to $28,865.7 million, with cash reserves of $3,542.4 million and inventories valued at $20,152.9 million as of September 30, 2024[366] - Total liabilities were reported at $6,455.0 million, with notes payable constituting $2,926.8 million[366] Homebuilding Operations - Homebuilding revenues increased 7% to $34.0 billion compared to $31.7 billion[225] - Homes closed increased 8% to 89,690 homes, while the average closing price decreased 1% to $378,000[225] - Net sales orders increased 10% to 86,561 homes, with the value of net sales orders increasing 11% to $32.7 billion[225] - Home sales revenue rose by 7% to $33.9 billion (89,690 homes closed) in 2024, up from $31.6 billion (82,917 homes closed) in 2023[254] - The average selling price of net sales orders in 2024 was $377,900, a slight decrease of 1% from the previous year[246] - The sales order cancellation rate improved to 18% in 2024 from 20% in 2023[249] Regional Performance - Homebuilding revenues in the Northwest region increased by 7% to $2,761.7 million in fiscal 2024, with pre-tax income rising to $420.8 million[272] - Homebuilding revenues in the Southwest region increased by 15% to $4,914.7 million in fiscal 2024, with pre-tax income rising to $703.5 million[273] - Homebuilding revenues in the Southeast region increased by 1% to $8,876.8 million in fiscal 2024, with pre-tax income decreasing to $1.4 billion[275] - Homebuilding revenues in the East region increased by 14% to $6,073.1 million in fiscal 2024, with pre-tax income rising to $1.1 billion[277] - Homebuilding revenues in the North region increased by 16% to $3,683.4 million in fiscal 2024, with pre-tax income rising to $498.4 million[278] Inventory and Land Management - Total homebuilding inventories amounted to $20,031.0 million as of September 30, 2024, with significant holdings in various regions[281] - The company plans to manage its inventory of owned land and lots relative to demand, actively controlling the number of unsold homes in inventory[281] - As of September 30, 2024, the total land/lots owned and controlled amounted to 632,900, with homes in inventory totaling 37,400[285] - The total remaining purchase price of lots controlled through land and lot purchase contracts was $25.2 billion as of September 30, 2024, compared to $21.1 billion in 2023[285] Financial Services - Financial services revenues increased 10% to $882.5 million compared to $801.5 million[238] - DHI Mortgage originated 70,308 first-lien loans in 2024, a 12% increase from 62,699 in 2023[300] - Total mortgage operations revenues increased by 11% to $681.6 million in 2024 from $616.3 million in 2023[306] - Pre-tax income from financial services increased to $311.2 million in 2024, up from $283.3 million in 2023, reflecting a growth of 9.9%[300] Expenses and Profitability - Selling, general and administrative (SG&A) expenses increased by 14% to $2.6 billion in 2024, representing 7.5% of homebuilding revenues[263] - Employee compensation and related costs were $2.1 billion in fiscal 2024, representing 82% of SG&A costs, with a 10% increase from the prior year[264] - Interest incurred by homebuilding operations decreased by 27% to $50.5 million in fiscal 2024, primarily due to an 11% decrease in average homebuilding debt[266] - Gross profit from home sales increased to $8.0 billion in 2024, maintaining a gross profit margin of 23.5%[257] Rental Operations - Rental revenues decreased to $1.7 billion compared to $2.6 billion[227] - The number of single-family homes closed decreased by 36% to 3,970 in 2024, while multi-family homes closed increased by 4% to 2,202[288] - The inventory of single-family rental homes decreased to 3,140 in 2024 from 5,630 in 2023, a decline of about 44%[291] - The rental operating margin for the rental segment decreased to 13.6% in 2024 from 20.1% in 2023[288] Claims and Insurance - The company maintains a loss reserve for mortgage loans based on historical experience and current market conditions[378] - As of September 30, 2024, the company had reserves for approximately 825 pending construction defect claims, up from 600 claims in 2023[391] - During fiscal 2024, the company was notified of approximately 600 new construction defect claims and resolved 375 claims at a total cost of $55.0 million[391] - Approximately 97% of the reserves established by the company relate to construction defect matters as of September 30, 2024, and 2023[390] Market Conditions and Risks - The company anticipates that seasonal patterns will continue to affect home closings and revenues, particularly in the third and fourth quarters of the fiscal year[368] - D.R. Horton, Inc. faces risks related to the cyclical nature of the homebuilding industry, including changes in economic conditions and mortgage financing availability[370] Accounting and Reporting - The Financial Accounting Standards Board (FASB) issued ASU 2023-07, effective for fiscal 2025, which will improve reportable segment disclosures for the company[396] - The company is evaluating the impact of new accounting standards on its consolidated financial statements and related disclosures[397]

Company Performance - D R Horton (NYSE: DHI) shares have been on a steady decline since the calendar third quarter earnings season began [1] - The decline is attributed to macro-driven worries about housing affordability and a disappointing outlook from most homebuilders, including D R Horton [1] Investment Strategy - The investment strategy focuses on companies with perfect qualitative attributes, buying them at an attractive price based on fundamentals, and holding them forever [1] - The portfolio is concentrated, aiming to avoid losers and maximize exposure to big winners [1] - Companies may be rated as 'Hold' if their growth opportunity is below the threshold or their downside risk is too high [1] Analyst Background - The analyst is an MBA graduate with an L L B in law and works as a financial analyst at a large pension fund [1]

Group 1: Mortgage Rates and Economic Impact - The average rate on the 30-year fixed mortgage increased by 9 basis points to 7.13%, the highest since July 1, 2023 [1] - Mortgage rates are influenced by bond yields, which have risen due to expectations surrounding Trump's victory and inflation concerns [2][6] - A homebuyer purchasing a $400,000 home with a 20% down payment would see their monthly payment rise from $1,941 in early September to $2,157 today, a difference of $216 [7] Group 2: Housing Market Reaction - Housing stocks, including major builders like Lennar, D.R. Horton, and PulteGroup, fell approximately 5% in midday trading following the election results [3] - Retailers such as Home Depot and Lowe's also experienced declines of about 3% [3] - The increase in mortgage rates and inflation expectations has a direct impact on builder stocks, which are sensitive to these changes [3] Group 3: Supply and Demand Dynamics - There was a 29.2% increase in the number of homes actively for sale in October compared to the previous year, marking the highest level of active inventory since December 2019 [8] - Pending sales of existing homes rose by 7% in September compared to August, indicating a surge in demand prior to the recent rate increases [7] Group 4: Industry Outlook - The National Association of Home Builders expressed optimism about working with the incoming Trump administration to promote a pro-housing agenda aimed at increasing housing supply and addressing affordability issues [5] - Trump’s focus on deregulation and opening federal land for home construction could influence future housing policies, although no detailed housing plan was presented [4]

Core Insights - Executives at major U.S. companies are increasingly discussing the presidential election and its potential impacts on their businesses, with a notable rise in mentions during earnings calls [2][3][13] Group 1: Election Impact on Business Sentiment - The word "election" was mentioned in 100 earnings calls of S&P 500 companies from September 15 to October 31, marking the highest frequency since 2004 [2][13] - Companies are expressing caution due to election uncertainty, with some leaders noting a general unpredictability affecting consumer behavior and business decisions [4][5][10] - D.R. Horton reported that buyers are hesitant to make purchases, anticipating lower mortgage rates in 2025 and feeling stress related to the election [14][15] Group 2: Sector-Specific Reactions - Southwest Airlines expects a decline in air travel around Election Day, while Royal Caribbean noted no long-term impact from elections on booking trends, though some volatility may occur [6] - The industrial market is experiencing a pause in large projects due to election-related uncertainties, as noted by executives from Xylem and Republic Services [10] - Equifax observed a slowdown in background screening volumes as companies reassess hiring in light of the election [11][12] Group 3: Broader Economic Context - The economic backdrop is perceived as weak, with nonfarm payrolls growing at the slowest rate since late 2020, influenced by external factors like hurricanes and strikes [11] - Companies like American Express and Tyler Technologies reported minimal impact from the election on their operations, indicating that some sectors remain insulated from political uncertainties [12]

Core Viewpoint - D.R. Horton reported disappointing fourth-quarter earnings, with sales and EPS falling short of expectations, indicating potential challenges in the housing market [1][2]. Financial Performance - Sales decreased by 5% year-over-year to $10.0 billion, missing the consensus estimate of $10.2 billion [1]. - EPS was reported at $3.92, below the consensus of $4.17 [1]. - Net sales orders increased by 1% to 19,035 homes but decreased by 2% in value to $7.1 billion [1]. Future Projections - D.R. Horton expects revenue for the upcoming year to be between $36.0 billion and $37.5 billion, lower than the consensus of $39.4 billion [2]. - The company anticipates closing between 90,000 and 92,000 homes for the year [2]. - Operating cash flow for FY25 is projected to exceed that of fiscal 2024 [2]. Market Sentiment - Executive Chairman David Auld noted that while mortgage rates have decreased, potential homebuyers are waiting for lower rates in 2025, contributing to current market hesitance [3]. - Following the earnings announcement, D.R. Horton shares rose by 2% to $170.60 [3]. Analyst Ratings and Price Targets - UBS analyst John Lovallo maintained a Buy rating but reduced the price target from $217 to $214 [4]. - Evercore ISI Group's Stephen Kim kept an Outperform rating while lowering the price target from $218 to $204 [4]. - Wells Fargo's Sam Reid maintained an Overweight rating and cut the price target from $220 to $190 [4]. - RBC Capital's Mike Dahl maintained an Underperform rating and lowered the price target from $154 to $145 [4]. - Citigroup's Anthony Pettinari maintained a Neutral rating and reduced the price target from $186 to $185 [4]. - The consensus price target for D.R. Horton is $166.6, with a high of $215 and a low of $73 [5].

Group 1: Housing Market Trends - The theme of housing stocks, including home improvement players and builders like DR Horton and Pulte Group, has gained about 23% year-to-date, in line with the S&P 500's 22% gain [1] - New single-family house sales in September 2024 were at a seasonally adjusted annual rate of 738,000, which is 6.3% above the September 2024 estimate and up about 4% from August [1] - Prices for new homes have remained flat at $426,300 compared to a year ago, while elevated existing home prices are driving buyers toward new homes [1] Group 2: Impact of Federal Reserve Actions - The Fed's recent 50 basis point rate cut to 4.75% to 5% has not significantly boosted housing stocks, with major builders like Lennar, DR Horton, and Pulte Group seeing stock price drops of 7 to 8% [2] - Although the rate cut initially lowered 30-year fixed mortgage rates to around 6.20%, rates have since risen to 6.50%, which may dampen home sales in October [2] - The Fed's commentary suggests potential further rate cuts, which could lead some home buyers to delay purchases [2] Group 3: Company Performance and Future Outlook - Pulte Group's stock has generated better returns than the broader market, with returns of 34% in 2021, -19% in 2022, and 129% in 2023 [3] - The fundamental under-supply of homes in the U.S. is expected to provide good demand visibility for major housing players, with volumes and revenues likely to hold up in the long run [3] - Pulte Group reported earnings of $3.35 per share, up from $2.90 in the year-ago quarter, with home closings rising 12% [3]

Homebuilding Sector Overview - The homebuilding sector is under pressure following D.R. Horton (DHI) reporting disappointing fiscal fourth-quarter results and providing worse-than-expected guidance for 2025, leading to DHI's worst trading day since March 2020 [1] D.R. Horton (DHI) - D.R. Horton is experiencing significant declines in stock performance due to its lackluster earnings report and negative outlook for the upcoming year [1] Lennar Corp (LEN) - Lennar's stock is one of the worst performers on the S&P 500 Index, trading 3.5% lower at $168.06, marking its lowest level since July, with a quarterly decline of 10.6% but a year-to-date increase of 12.5% [2] KB Home (KBH) - KB Home's stock is down 3.2% at $77.45, having traded as low as $74, its lowest since early August, and is on track for a third loss in five sessions, with a quarter-to-date deficit of 9.4% [3] PulteGroup, Inc. (PHM) - PulteGroup's stock has decreased by 3.6%, last seen at $129, with a dip to $122 marking its lowest since late August, and is down 10.2% for the quarter, trading below its 80-day moving average for the first time since early July [4]