FORT WORTH, Texas (
shares plunged on Friday as management's weak outlook on 2011 overshadowed narrower fourth-quarter losses.
D.R. Horton's quarterly loss of 3 cents per share came in a penny ahead of expectations, compared with a year-earlier loss of 74 cents per share.
Revenue slipped 8.3% to $925.7 million. Top-line results also beat analysts' consensus call.
Despite the improvement, management's outlook on the coming year offered little confidence to investors. Horton said it expects to sell fewer homes in fiscal 2011 than it did in fiscal 2010.
In the recent quarter, Horton sold 3,979 homes, 20.5% fewer homes than it sold in the year-earlier quarter. The company's backlog of homes under contract at the end of the quarter was 4,128, valued at $850.8 million, compared with a backlog of 5,628 homes, valued at $1.1 billion, in the end of the fourth quarter last year.
"We're not projecting a huge spring bump," CEO Donald Tomnitz told investors on a conference call. "I just don't see a lot of hope for a great spring market."
Investors, worried about the prospects of a still-long road ahead toward sustainable recovery in the industry, responded by bidding D.R. Horton shares 4.8% lower Friday afternoon to trade at $11.59.
Chairman Donald R. Horton said that "As we expected, market conditions in the homebuilding industry have been even more challenging after the expiration of the tax credit at the end of April."
The housing market has been under tremendous pressure for some time, and demand fell further after the
that offered credits up to $8,000 for first-time buyers and $6,500 for those buying new primary residences.
Stifel Nicolaus analyst Michael Widner maintained a hold rating on D.R. Horton shares following its earnings release, and reiterated his modest concerns about the homebuilder's relative valuation to the group.
He noted that the builder's operating results came in ahead of his expectations, offset by higher impairment charges.
Widner pointed out that Horton's stock was up nearly 16% since November of last year, while the rest of the builders are up 10.4%, on average.
"We believe expectations may have gotten a bit ahead of Horton and while we see results as solid across the board the valuation has separated from the pack somewhat over the past ten days and we find it modestly vulnerable here," he noted.
Standard & Poor's Equity Research homebuilders analyst Ken Leon maintained a sell rating on Horton shares, and lowered his fiscal 2011 earnings per share estimate by 20 cents to 45 cents.
Horton took $30.8 million in land charges. Fellow builders
also booked hefty land charges in the recent quarter as wary consumers, still rattled by unemployment, continue to shy away from large purchases like new homes.
booked real estate-related impairment charges of $800,000 in the recent quarter, while
quarterly results were helped by fewer charges.
"We expect another very challenging year for the homebuilding industry as the fundamental drivers of demand, the overall economy, job growth, and consumer confidence, are still very weak," Tomnitz said.
"There's a new baseline of demand that many homebuilders are forecasting following the expiration of the tax credit," noted Morningstar analyst Mike Gaiden. "As they look out, their future expected earnings from their current development portfolios are now forcing them to take impairment (charges)."
Horton maintained a 3.75 cent
dividend, to be paid on Dec. 8 to stockholders of record on Nov. 24.
-- Written by Miriam Marcus Reimer in New York.
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