Why D.R. Horton Is Down in the Dumps

The housing recovery may well be under way, but nobody said it'd be smooth sailing. If there was any doubt about that, then the performance of D.R. Horton's (NYSE: DHI  ) shares today should clear things up. After the nation's largest homebuilder reported earnings for the fiscal third quarter this morning, investors and traders responded by sending its shares down by more than 8%.

You'd be excused for concluding that the market's response to D.R. Horton's earnings was an overreaction. For the three months ended June 30, the company earned $146 million, or $0.42 per diluted share. While this was 97% less than the same period last year, it handily beat the consensus estimate of $0.34 per share. In addition, the year-over-year comparison is rendered largely meaningless by a $716.7 million tax benefit the company recorded in the third quarter of 2012.

More importantly, orders for new homes -- which is a key leading indicator for homebuilders given that they don't book revenue until closing -- climbed by 12% over the quarter to 6,822. By comparison, PulteGroup (NYSE: PHM  ) , which also reported earnings today, said its orders declined by a similar magnitude. On top of this, as you can see in the chart above, D.R. Horton increased the number of homes it closed on by 30% to 6,464, and its backlog shot up by 36%.

All things considered, in turn, at least from a fundamental perspective, it was a good quarter for the megahomebuilder.

So what are investors all worked up about today? It's hard to say, other than to assume that it had to do with Pulte's lackluster performance on top of the Commerce Department report yesterday, which showed that new-home prices declined last month and could thereby threaten homebuilder margins going forward.

The stock Warren Buffett wishes he could buy
The price of becoming the world's greatest investor is that Warren Buffett can no longer make many of types of investments that made him rich in the first place. Find out about one such opportunity in "The Stock Buffett Wishes He Could Buy." The free report details a sector of the economy Buffett's heavily invested in right now and exactly why he can't buy one attractive company in that sector. Click here to keep reading. 

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2559045, ~/Articles/ArticleHandler.aspx, 9/26/2016 3:23:02 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:02 PM
DHI $30.18 Down -0.43 -1.40%
D.R. Horton CAPS Rating: ***
PHM $19.81 Down -0.05 -0.25%
PulteGroup CAPS Rating: ***