QUOTE AND NEWS
The Market Financial  Jul 25  Comment 
If anyone needed proof that there was a disconnect between Wall St. and Main St. then look no further than the housing stocks, in particular D.R. Horton, Inc. (NYSE:DHI). The stock plummeted an eye popping 11.5% in a single day, and basically took...
TheStreet.com  Jul 25  Comment 
Story updated at 9:50 a.m. to reflect market activity. NEW YORK (TheStreet) -- D.R. Horton was downgraded to "neutral" from "buy" by MKM Partners Friday. D.R. Horton fell -0.5% to $21.69 in morning trading. The analyst firm lowered its price...
SeekingAlpha  Jul 25  Comment 
D.R. Horton, Inc. (NYSE:DHI) Q3 2014 Earnings Conference Call July 24, 2014 10:00 AM ET Executives Donald J. Tomnitz – Vice Chairman, President and Chief Executive Officer Bill W. Wheat – Executive Vice President and Chief...
Motley Fool  Jul 24  Comment 
Is this meaningful or just another movement?
Wall Street Journal  Jul 24  Comment 
D.R. Horton Inc. said its fiscal third-quarter profit fell despite strong home-building revenue and an increase in new sales orders, as the home builder recorded impairment charges tied to assets in the Chicago area.
Forbes  Jul 23  Comment 
Wall Street is high on D.R. Horton, expecting it to report earnings that are up 17% from a year ago when it reports its second-quarter earnings on Thursday, July 24, 2014. The consensus estimate is 49 cents per share, up from earnings of 42 cents...
Market Intelligence Center  Jul 23  Comment 
D.R. Horton Inc. (DHI) traded between $23.95 and $24.43 before closing at $24.30 Tuesday and presents some attractive trading opportunities today. MarketIntelligenceCenter.com’s patented algorithms selected a Jan. '15 $22.00 covered call for a...
Benzinga  Jul 17  Comment 
Stocks related to home construction opened sharply lower Thursday on news of a 9.3 percent drop in June housing construction. The U.S. Census Bureau said housing starts in June fell to 893,000 units, from one million units in May. Still, the...
Forbes  Jul 14  Comment 
Shareholders of D.R. Horton Inc. (NYSE: DHI) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the January 2016 covered call at the $30 strike and collect the premium based on the $1.60 bid, which annualizes...




 

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