Ahead Of D.R. Horton's Q1 Results

(RTTNews) - Homebuilding company D.R. Horton (DHI) continues to focus on producing double-digit annual growth in both its revenue and pre-tax profits, while generating positive cash flows and increasing its returns. In an effort to be the leading builder in each of its operating markets with all of its brands, the company plans to maintain consistent, broad product diversity over the long term.

The company believes it is well-positioned to achieve its strategic focus with solid balance sheet; industry-leading market share; broad geographic footprint; diversified product offering across its D.R. Horton, Emerald, and Express brands; and attractive finished lot and land position.

D.R. Horton is due to release its first-quarter results before the bell on Monday, January 25, with analysts polled by Thomson Reuters estimating earnings of $0.41 per share on revenue of $2.40 billion. Analysts' estimate typically exclude certain special items.

For the first quarter...

The company expects its first-quarter number of homes closed to approximate a beginning backlog conversion rate in a range of 75% - 78%. It anticipates first-quarter home sales gross margin to be in the high 19% - 20%, and homebuilding SG&A to be in the range of 10.5% - 10.9% of revenues.

For fiscal 2016...

The company projects consolidated revenues to range between $12 billion and $12.5 billion and to close between 39,500 and 41,500 homes. Consolidated pre-tax margin is expected to be in the range of 10.5% - 11%. Fifteen Wall Street analysts have a consensus revenue estimate of $12.06 billion.

The homebuilder also anticipates its home sales gross margin for the full year of fiscal 2016 to be in the high 19% - 20%, with potential quarterly fluctuations that may range from 19% - 21%. The company expects annual homebuilding SG&A expense to be in the range of 9.2% - 9.4% of homebuilding revenues, with the first two quarters of the year higher than this range and the third and fourth quarters below the range.

D.R. Horton also continues to expect to generate $300 million - $500 million of positive cash flow from operations. Meanwhile, the company said its fiscal 2016 results will be significantly impacted by the spring selling season.

In the previous quarter...

D.R. Horton's fourth-quarter profit increased 44% from last year, reflecting a non-cash tax benefit of $17.5 million from a reduction of the company's valuation allowance on its deferred tax assets. The company increased its quarterly cash dividend by 28% to $0.08 per share.

Donald Horton, Chairman of the Board, said, "With a sales backlog of 10,662 homes and a robust lot supply and inventory of homes available for sale, we are ready to capitalize on market opportunities to deliver another strong performance in fiscal 2016."

Net income for the fourth-quarter rose to $238.9 million or $0.64 per share, from $166.3 million or $0.45 per share, in the same quarter of fiscal 2014. Analysts polled by Thomson Reuters expected earnings of $0.62 per share.

The quarterly results included a non-cash tax benefit of $17.5 million from a reduction of the Company's valuation allowance on its deferred tax assets.

Homebuilding revenue for the fourth quarter increased 28% to $3.1 billion from $2.4 billion last year. Homes closed in the quarter increased 23% to 10,576, compared to 8,612 homes in the year-ago quarter. Wall Street expected revenues of $3.04 billion for the quarter.

Net sales orders for the fourth quarter grew 19% to 8,477 homes from 7,135 homes in the year-ago quarter, and the value of net sales orders increased 22% to $2.5 billion from $2.0 billion.