DR Horton beats profit estimate, raises 2018 forecast


Homebuilder D.R. Horton reported a better-than-expected quarterly profit on Thursday and raised its fiscal 2018 revenue and cash flow forecasts, further evidence that a strong U.S. job market is feeding through to demand for houses.

Housing demand in the United States declined sharply for four years running after the sub-prime crash of 2007-2008 but has steadily gained momentum since, supported by falling unemployment and ultra-low interest rates.

Thursday’s results from Horton showed orders at the country’s largest housebuilder climbed 18.2 percent to 10,333 homes in the quarter ended Sept. 30 and the average selling price rose 3.2 percent to $306,502.

“The (fourth quarter) housing gross margin of 20.3 percent was 40 basis points higher than our estimate,” Wedbush analyst Jay McCanless said.

“We anticipate the better-than-expected unit volume growth was the main contributor to gross margin and EPS surpassing our forecast.”

Horton, which also sells homes under the Express and Emerald brands, said it now expected fiscal 2018 consolidated revenue to rise about 13 percent to 19 percent, compared with its previous estimate of 10-15 percent.

The company also raised its full-year forecast for cash flow from operations to at least $500 million, excluding the impact of its still pending acquisition of real estate developer Forestar.

That compared to the previously estimated range of $300 million to $500 million.

Horton said it expects to deliver between 50,500 and 52,500 homes in the fiscal year ending September 2018, up 10 percent to 15 percent from the past year. Its net income rose to $313.2 million, or 82 cents per share, beating analysts’ average estimate of 81 cents per share, according to Thomson Reuters I/B/E/S/.

Home sales revenue rose 10.9 percent to $4.04 billion.

In October, the United States’ No. 2 homebuilder Lennar agreed to buy smaller rival CalAtlantic for $5.7 billion in a deal that would make the resulting company bigger than Horton.

Analysts said the moves reflect builders’ efforts to deal with higher land acquisition costs and a tighter labor market, with some speculating Horton might follow suit with further acquisitions of its own.

Shares of D.R. Horton were up 0.4 percent at $45.60 in light premarket trading.

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