QUOTE AND NEWS
Benzinga  Oct 1  Comment 
In a report published Wednesday, Sterne Agee analyst Jay McCanless reiterated a Buy rating and $25.00 price target on D.R. Horton, Inc. (NYSE: DHI). In the report, Sterne Agee noted, “We reiterate our Buy rating on DHI. Today's announcement...
Wall Street Journal  Sep 30  Comment 
D.R. Horton has named Chief Operating Officer David Auld to replace Chief Executive Donald Tomnitz, who is retiring.
TheStreet.com  Sep 22  Comment 
NEW YORK (TheStreet) -- Shares of D.R. Horton Inc. are lower by 3.14% to $21.26 in mid-afternoon trading on Monday, as home builder stocks react negatively to the National Association of Realtors report that U.S. homes sales declined 1.8% in...
TheStreet.com  Sep 17  Comment 
NEW YORK (TheStreet) -- Shares of D.R Horton Inc. are higher by 3.70% to $22.40 in mid-morning trading on Wednesday, as homebuilding stocks rise as U.S. homebuilder confidence spiked to its highest levels in almost nine years, Bloomberg...
StreetInsider.com  Sep 9  Comment 
UPGRADES Stifel Nicolaus raises Global Cash Access (NYSE: GCA) from Hold to Buy with a price target of $10. Cowen moves Newmont Mining Corp. (NYSE: NEM) from Market Perform to Outperform. JPMorgan upgrades D.R. Horton (NYSE: DHI) from Neutral to...
TheStreet.com  Sep 9  Comment 
NEW YORK (TheStreet) -- Shares of D.R. Horton, Inc.a are up 0.79% to $21.79 in early-market trading after the home building company was upgraded to "overweight" from "neutral" ataJPMorgan Chase , with a higher price target of $26 from...
Wall Street Journal  Sep 7  Comment 
Home builder's hard-hit stock is now in bargain territory.
StreetInsider.com  Sep 4  Comment 
UPGRADES UBS upgrades D.R. Horton (NYSE: DHI) from Neutral to Buy and moved its price target from $20 to $26. Click Here for more color. Barclays moves IAC/InterActiveCorp (Nasdaq: IACI) from Equalweight to Overweight with a price target of...
TheStreet.com  Sep 4  Comment 
NEW YORK (TheStreet) -- Shares of D.R. Horton, Inc.a are higher in pre-market trading by 1.19% to $21.34 Thursday after the homebuilding company was upgraded to "buy" from "neutral" at UBS a, with an increased price target to $26 from...
Yahoo  Aug 19  Comment 
Entry-level and first-time buyers, who tend to buy smaller homes, have largely remained sidelined due to strict mortgage-qualification standards and tepid wage and job growth. Yet executives at builders KB Home, PulteGroup Inc., D.R. Horton Inc....




 

D.R. Horton (NYSE: DHI) is one the largest homebuilder in the United States with operations in 27 states and 75 metropolitan markets of the United States, primarily under the name of D.R. Horton, America’s Builder.[1] DHI constructs single-family homes, mostly for entry-level and first-time home buyers. DHI also has a small financial services division which provides mortgages and title agency services to homebuyers.

While DHI's national scope can provide it with some protection from regional fluctuations in the U.S. housing market, its focus on middle-income homebuyers makes it particularly exposed to a national housing slump. As a result of a slumping housing market and the exacerbating influence of the subprime lending crisis, the company's revenue and homes closed fell significantly.

Company Overview

Business Financials

In 2009, DHI earned a total of $3.7 billion in total revenues. This was an alarming decline from its 2008 total revenues of $7.7 billion. Despite the decrease in revenues, DHI was able to improve upon its net income situation. Between 2008 and 2009, DHI was able to reduce its net loss from a net loss of $2.6 billion in 2008 to a net loss of $545 million in 2009.[2]

Business Segments

DHI's two primary segments include:

Home Building

DHI builds and sells homes in 27 states and 83 metropolitan markets of the United States. The company's homes generally range in size from 1,000 to 5,000 square feet and in price from $90,000 to $900,000, with an average closing sales price of approximately $259,200. This segment generally accounts for well over 95% of the company's revenues.

Financial Services

DHI provides mortgage banking and title agency services primarily to homebuyers of D.R. Horton homes. After DHI makes a loan, it generally does not hold on to the loan or service it -- it instead sells the loan to other investors. DHI title company provide title insurance, home examination, and closing services, which are all required during the home purchase process.

Key Trends & Forces

Interest Rates

Interest rates have several critical effects on the company. In general, rising rates spell bad news for all homebuilders for several reasons:

  1. As interest rates increase, home owners with floating rate debt or adjustable rate mortgages become more likely to default on their loans and foreclose on their homes. This, in turn, increases the inventory of available homes for sales, lowering prices and increasing options for potential buyers. Also, though the company sells most of the mortgages it originates through its financing segment within 30 days, it assumes a higher default probability on the mortgages is does hold.
  2. As interest rates and/or default rates increase, lenders are more likely to demand greater compensation in the form of higher mortgage rates. When buyer financing is less attractive, purchasing a home becomes less appealing and the company can experience greater difficulty unloading its inventory.
  3. When rates are higher, available and existing financing for the company itself becomes less attractive. Getting favorable terms on any new debt to finance construction is more difficult. Also, the company’s interest expense on its floating rate debt increases, pressuring margins and increasing financial risk. In 2007, DHI had nearly $4B in homebuilding debt and close to $400 million of debt associated with its financial services division.

The U.S. Housing Market Cyclicality

Homebuilding is a highly cyclical business and is often a beneficiary and victim of business cycles. Demand for homes is dependent upon the strength of the job market, growth in gross and per capita GDP, the level of interest rates and the availability of mortgage financing. When growth is strong, interest rates are low, and employment is robust, potential first time homeowners (DHI's target market) and those wishing to relocate can pursue new homes more affordably. Thus, more people buy homes, which drives the volume and pricing at which the company can sell its home inventory.

The subprime crisis and home prices

As mentioned above, home prices and the level of new home construction are driven by macroeconomic variables like GDP growth, interest rates and employment. In this environment, rising housing prices can lead to lax lending standards and, sometimes, exuberance as collateral values rise, which further fuels price increases. As has happened recently, however, home prices across the country can also experience sharp declines when this exuberance catches up to buyers and lenders. Currently, in part because of a cycle fed by the subprime mortgage crisis, in which mortgage borrowers with poor credit histories or little documentation have struggled to meet payments, home prices in many areas have declined. This, in turn, exacerbates default rates since these borrowers cannot refinance mortgages given deterioration of collateral. Homebuilders such as DHI assume the risk of continued price declines and hampered demand. If home prices stay depressed for extended periods, the company may have to write down the value of its properties or sell them off at losses.

Competition

DHI competes against a highly fragmented base of other homebuilders. In most of DHI's markets, it is either the largest or one of the five largest builders. [3] Some of DHI's major competitors include Lennar (LEN), Pulte Homes (PHM), Centex (CTX), and KB Home (KBH).

References

  1. DHI 10-K 2009 Item 1 Pg. 1
  2. DHI 10-K 2009 Item 6 Pg. 23
  3. DHI 10k 2007, Pg. 20
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki