D.R. Horton, Inc. (DHI)

[MiamiGent]

DHI D.R. Horton's Profit Jumps
Wall Street Journal
November 12, 2012, 1:13 p.m. ET.
By ROBBIE WHELAN

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D.R. Horton Inc., DHI -5.44%the largest U.S. home builder by annual closings, reported its most profitable year since 2006, capped by a sharp rise in fiscal-fourth-quarter profit on strong revenue.

An improving housing market has triggered the biggest rally in home-builder stocks in years, sending Horton's shares up about 63% this year. The Fort Worth, Texas, company has long been a favorite with industry analysts because its management team avoids risk and it constructs low-priced homes that are accessible to many buyers.

D.R. Horton said about 49% of what it builds are speculative homes, which are typically sold to first-time buyers, but that percentage could shrink going forward, as the company focuses on build-to-order and move-up homes for retirees and growing families.

"Unless we have some sort of macro situation with the U.S. economy, we feel comfortable that we'll have a much better 2013 than we did 2012," said Donald Tomnitz, D.R. Horton's chief executive, in a conference call with analysts Monday.

For the quarter ended Sept. 30, D.R. Horton reported a profit of $100.1 million, or 30 cents a share, compared with a year-ago profit of $35.7 million, or 11 cents a share.

Home-building revenue jumped 21% to $1.3 billion. Closings increased 12% to 5,575 from a year earlier, while orders rose 24% to 5,276 homes. The cancellation rate was 27%, compared with a reported 29% a year ago. The company's average sales price for the quarter was $231,100, or 7% higher than the previous-year quarter.

Chairman Donald R. Horton said Monday that the company has continued to see strong sales demand through October and into November. The sales order backlog of homes under contract, at the end of the fiscal year, was up 49% to 7,240 homes, which Mr. Horton described as "our highest year-end backlog since fiscal 2007."

Beazer Homes USA Inc. BZH -18.15%on Monday also posted strong revenue gains, but its fiscal-fourth-quarter loss widened as the home builder recorded a large debt-extinguishment loss.

The nation's ninth-largest builder has struggled to achieve profitability since the housing downturn, reporting a string of losses in recent quarters while many of its competitors have begun to capitalize on the nascent housing recovery.

The builder has yet to fully recover from previous corporate missteps, including a federal probe into lending practices and a settlement with the Securities and Exchange Commission over accounting issues that helped force out longtime Chief Executive Ian McCarthy in 2011.

In spite of these troubles, sales and orders have picked up as consumers take advantage of the record-low interest rates that have made buying a home cheaper than renting in many markets.

"Operationally, we generated significant growth in orders, closings and backlog, while seeing improving trends in gross margins," CEO Allan Merrill said Monday. "From a balance sheet perspective, we added liquidity, improved our book value, extended debt maturities and reduced interest expense."

For the quarter ended Sept. 30, Beazer posted a loss of $66.2 million, or $2.82 a share, compared with a year-ago loss of $43.2 million, or $2.91 a share. Revenue rose 11% to $370.9 million as home construction and land sales climbed.

Home-building gross margin, excluding impairments and abandonments, widened to 11.8% from 9.9% in the prior year. The builder's cancellation rate was down at 31.1% from 34.2%. Total home closings were up 17% to 1,608. New orders rose 10% to 1,110 homes, a rate that is slower than many of the home builder's peers. Total backlog units rose 31% from the year-ago quarter