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Why D.R. Horton Stock Just Popped 12%

By Rich Smith – Updated Apr 28, 2020 at 4:02PM

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Coronavirus is a problem, but a manageable one for the company, and isn't affecting its dividend.

What happened

Shares of "America's largest homebuilder" D.R. Horton (DHI 0.66%)  surged in Tuesday trading and, with less than an hour to go in the trading day, were up 12% at 3:10 p.m. EDT. 

D.R. Horton reported its fiscal second-quarter 2020 earnings this morning. Instead of the $1.12 per share on sales of $4.4 billion that Wall Street had predicted it would report, it said it earned $1.30 per share on sales of $4.5 billion.

Construction workers examine blueprints in front of a house under construction.

Image source: Getty Images.

So what

Quarterly sales grew 9% year over year for the homebuilder, and earnings were up 40%. During the quarter, Horton closed on sales of 8% more homes than a year ago, and in terms of the value of those sales, growth was 10%. 

What's more, it looks like the good times might keep rolling for Horton. The COVID-19 crisis notwithstanding, the company noted that it took in 20% more orders for new homes in the quarter than in last year's Q2, and again at higher prices, too. The dollar value of orders taken in rose 22%.

Backlog at the company now stands at 19,328 homes under contract, up 14% year over year, and the value of those backlogged orders is $5.9 billion -- up 18%.

Now what

Looking ahead to the rest of the year, D.R. Horton chairman Donald R. Horton admitted that "we began to see the impact of the pandemic on our operations and housing demand in late March and April ... adversely"; citing that impact, D.R. Horton "has withdrawn its previously issued fiscal 2020 guidance."

"Cancellations and decreases in sales orders in late March and to date in April" are up "as compared to the same period in the prior year. Month-to-date in April 2020, the Company's net sales orders are approximately 11% lower than the same period a year ago," admitted the chairman. 

Nevertheless, he reassured investors that "our strong balance sheet, ample liquidity and low leverage provide us with flexibility to withstand difficult economic conditions." The company continues to pay out its dividend, which currently offers a modest 1.7% dividend yield.

Seeing management match actions to words, investors are rewarding D.R. Horton stock today.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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