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No Surprises in Builders' Outlook

D.R. Horton and Beazer issue 2006 forecasts largely in line with expectations.

Updated from 10:27 a.m. EST


D.R. Horton

(DHI) - Get D.R. Horton, Inc. Report


Beazer Homes

(BZH) - Get Beazer Homes USA, Inc. Report

reported strong quarterly earnings, and their outlooks for 2006 came in near expectations.

Meanwhile, the latest government data show that last year saw the largest number of new housing completions in over 30 years.

D.R. Horton, the country's largest homebuilder, reported a better-than-expected 29% rise in fiscal first-quarter earnings and said 2006 should be another big year.

Fort Worth, Texas-based D.R. Horton earned $310.1 million, or 98 cents a share, in the quarter, compared with $241 million, or 76 cents a share, a year earlier. Homebuilding revenue rose 15% from last year to $2.84 billion. Analysts surveyed by Thomson First Call expected EPS of 94 cents and sales of $2.98 billion in the latest period.

The company closed sales on 9,891 homes in the most recent quarter, compared with 9,680 a year earlier. Horton's backlog of homes sold but not yet closed on totaled $6.21 billion at the end of the quarter.

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Horton said earnings in the quarter ending in March should be $1.05 to $1.10 a share; the Thomson First Call mean estimate is for $1.09 a share. For the year ending in September, the company sees earnings of $5.25 to $5.35 a share, bracketing analysts' average estimate of $5.34 a share.

Atlanta-based Beazer also reported a better-than-expected 29% rise in fourth-quarter earnings, but it issued 2006 guidance that came in slightly below analyst estimates.

Beazer earned $89.9 million, or $2 a share, in the quarter, compared with $69.7 million, or $1.57 a share, a year earlier. Revenue from homebuilding, land sales and mortgage originations rose 21% from last year to $1.1 billion. Analysts expected EPS of $1.96 and revenue of $1.05 billion in the quarter.

The company closed sales on 3,829 homes in the quarter, up 7.1% from a year earlier. At the end of the quarter, the company's backlog of homes sold but not yet closed totaled was valued at $2.78 billion.

Beazer said its 2006 EPS would meet or exceed $10.50 a share. Analysts' mean EPS estimate is $10.59, according to First Call. But the company could beat the estimate this year since its own guidance does not include any benefits from share buybacks. Beazer increased its buyback program in November, and it expects to make share repurchases of $200 million to $250 million in fiscal 2006, which will add to earnings per share.

D.R. Horton shares recently were down 44 cents, or 1.1%, to $39.37. Shares of Beazer were unchanged at $77.59.

On Thursday, meanwhile, the U.S. Census Bureau said residential housing starts in December came in at a seasonally adjusted annual rate 1.9 million, down 5.7% from a year earlier. Economists were expecting 2.04 million starts, according to



For all of 2005, an estimated 1.93 million homes were completed, the highest level since 1973. An estimated 1.63 million single-family homes were completed -- the highest level on record -- representing a 6.7% rise from 2004.

"What we don't know is how many of those (completed) houses are spec, how many are built for buyers," says Stuart Hoffman, chief economist for PNC Financial Services Group.

But Hoffman expects that since the housing starts remain near 2 million, there are probably not lot of spec homes on the market. If there were a large amount of spec homes out there, then permit numbers would likely be dropping even more, he says.

"We're seeing a cooling of the housing market but not a deep freeze," he says.