Earnings from D.R. Horton and existing home sales data were released Thursday morning—and they’re both sending the same message about the housing market.
Housing giant
D.R. Horton
reported better-than-expected fiscal third-quarter numbers Thursday morning. While the results and company outlook were positive, investors reacted with caution. Horton (DHI) earned $3.06 a share on $7.3 billion in sales. Wall Street was looking for $2.80 per-share earnings on $7.2 billion in sales. It’s the company’s 10th consecutive quarterly earnings beat. “The D.R. Horton team delivered outstanding results in the third fiscal quarter of 2021, highlighted by EPS increasing 78%,” said Donald Horton, chairman of the board, in a statement. “These results reflect our experienced teams and production capabilities, industry-leading market share, broad geographic footprint, and diverse product offerings across multiple brands.”
On Thursday, Horton shares were up about 33% year to date, better than the comparable 16% and 14% respective gains of The company’s first-half solid results were driven by an improving economy. Housing starts in June, for instance, rose about 6% compared with May and almost 30% year over year. The June starts figure also exceeded economist projections.
The Barron’s Daily
A morning briefing on what you need to know in the day ahead, including exclusive commentary from Barron’s and MarketWatch writers. The company sounds upbeat about the coming months, too. “Housing market conditions remain very robust, with home buyer demand exceeding our current capacity to deliver homes across all of our markets,” the chairman said. “As our top priority is to fulfill our commitments to our homebuyers consistently, we have slowed our home sales pace to more closely align to our current production levels while building out the infrastructure needed to support a higher level of home starts.”
The slowing home sale pace might be one reason investors react cautiously, though they are probably not something to worry about. June’s existing-home sales, reported Thursday morning, grew 1.4% compared with May and 23% compared with June 2020, though the annualized selling rate of 5.86 million homes missed expectations by a hair. But there doesn’t appear to be any real slowdown in the housing market. D.R. Horton also reported a current-home inventory of about 47,000, up 55% from a year ago. “The demand for homes has far exceeded D.R. Horton’s ability to produce homes,” he explains.
Stephen Stanley,
Chief economist at Amherst Pierpont. “So, the company slowed its sales pace.”
With that inventory, the company expects to generate about $27.9 billion in sales for its full fiscal year, increasing about $700 million from the guidance given in April. With one quarter left in the company’s fiscal year, the direction implies more than $8 billion in fourth-quarter sales, better than the Street’s current projection of $7.7 billion. The Thursday-morning stock weakness can probably be best described as a bull-market indicator. When things are good, the investor playbook advises “sell the news and buy the dips.”
