Earnings Drop at Horton, M.D.C.

Homebuilders D.R. Horton ( DHI) and M.D.C. Holdings ( MDC) both reported falling earnings and decreasing orders for the second quarter, as land write-offs and shrinking operating margins continue to hurt the sector.

The M.D.C. news was perhaps most surprising, since the company widely missed analysts' earnings estimates. The company earned $76.5 million in the quarter, a 25% drop from net income of $102.6 million a year ago. On a per-share basis, M.D.C.'s earnings fell to $1.66 from $2.25 a year earlier. Analysts expected $2.15 a share, according to Thomson First Call.

Much of the miss came from lower-than-expected margins of 23.2% and higher selling, general and administrative expenses, including a $7.9 million write-off of land options and project costs, according to a research note from Banc of America analyst Daniel Oppenheim.

M.D.C also reported a 43% drop in new orders to 2,738 homes.

At Horton, the results were generally as expected, since the builder preannounced last week, when it also slashed its full-year guidance.

Horton, the country's largest homebuilder, earned $292.8 million, or 93 cents a share, compared with $371.7 million, or $1.17 a share, a year earlier. Results were hampered by an 11-cent charge related to land option write-offs. Prior to the warning last week, analysts had expected Horton to earn $1.30.

Orders fell 4% to 14,316 units. Last week, Horton said it expects earnings of at least $3.65 a share, down from its late May guidance of $5.25 to $5.35 a share.

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