D.R. Horton (DHI, Financial) announced a 33% increase in fourth quarter 2014 revenue to $2.4 billion, compared to revenue of $1.8 billion during the same period last year. Revenue for fourth quarter 2014 also exceeded analysts' expectations of $2.38 billion of revenue.
Horton reported fourth quarter of fiscal year 2014 net income of $166.3 million, or $0.45 per diluted share as compared to $139.5 million, or $0.40 per diluted share, in the third quarter of fiscal year 2013. However, fourth quarter of fiscal 2014 earnings missed analysts polled by Thomson Reuters expectation of 48 cents.
A strong outlook
Even though the demand for new homes in largely all of its key markets remained fairly steady Horton delivered more than 20% growth in both pre-tax income and revenue by effectively utilizing its platform being the country’s major and highly geographically varied homebuilder. It has registered 46% greater home closures compared to any other builder in the last 12 months and is very-well positioned for solid future growth.
During the fourth quarter, its homes closed and sold expanded 25% and 38% respectively and recorded another excellent quarter of profitability. These crucial results illustrate the effectiveness of Horton’s key strategic initiatives towards business expansion.
Horton’s expanded community count, good stock for homes, plots and land supply puts the builder in a robust competitive position. Looking at the 29% value expansion of its excess sales and its year-over-year October sales development exceeding 20%, further double-digit expansion is forecasted in pre-tax profits, revenue and home closings in 2015. The ongoing planned focus of Horton is on leveraging its competitive position for delivering double-digit development in both pre-tax profits and revenue coupled with enhancing its cash flow and expanding its returns. This in turn gives the company enough flexibility to invest into future growth opportunities.
Horton witnessed continued excellent profitability growth at the center of its branded communities illustrating considerable closings and sales expansion in the quarter. Further, Horton launched its innovative Emerald Homes and Express Homes brands. The Express Homes brand is developed for entry-level buyers mainly focused on affordability is currently being proposed in 24 markets and eight states. The prior home brand is believed to be a significant growth opportunity for Horton, moving ahead.
Portfolio developments
There’s continued healthy customer response to its reasonable Express product releases and several Express Homes communities are believed to launch in the mainstream of its markets by fiscal 2015 end.
Emerald Homes is a Horton’s brand for high-end and luxury communities and is currently accessible in 34 markets in 14 states. Horton plans to gradually and continuously launch new Emerald Homes communities in several other markets in fiscal year 2015.
In 2014, Horton invested $2.3 billion in development, lots and land. By September this year Horton’s lot portfolio comprised of 125,000 owned lots with extra 59,000 lots handled via option contracts. 69,000 lots are over with 37,000 optioned and 32,000 owned. Hoston’s sum total of 184,000 lots bought and managed puts it in a solid competitive position in the present housing market conditions, with enough supply to accelerate robust closings and sales growth in the future.
Going forward, Horton estimates to close 34,500 to 37,500 homes in fiscal 2015 and thus generate excellent overall revenue.
Conclusion
The value for Horton’s closings and sales enhanced by 33% and 41% respectively in the quarter and hence generating solid profitability for the quarter. It also made significant progress for the year in achieving its long-term objective of generating significant positive cash flows from operations. This is believed to solidify the company’s position to plan for other major investments, making it a good investment.
