Real Estate

D.R. Horton sees loss, still beats views

Builder swings to fourth-quarter loss but manages to top expectations; firm expects housing environment to remain 'challenging.'

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By Chris Isidore, CNNMoney.com senior writer

Homebuilder D.R. Horton reported a much smaller-than-forecast loss in its fiscal fourth quarter.
Homebuilder D.R. Horton reported a much smaller-than-forecast loss in its fiscal fourth quarter.

NEW YORK (CNNMoney.com) -- D.R. Horton, one of the nation's largest homebuilders, reported a much smaller- than-expected loss in the most recent period, a rare glimmer of relatively good news from a battered sector.

Horton (Charts, Fortune 500) reported that it lost $50.1 million, or 16 cents a share, in its fiscal fourth quarter, which ended Sept. 30.

While that's far worse than the profit of $277.7 million, or 88 cents, it earned in the year-earlier period, it's far better than the forecast loss of 66 cents from analysts surveyed by earnings tracker Thomson First Call. It's also an improvement from the loss of $2.62 a share in the fiscal third quarter.

Revenue was down 35 percent to $3.1 billion, which dropped the company back to No. 3 in the industry in terms of revenue. But that also was better than forecasts of $2.9 billion for the period.

Shares of Horton gained 6 percent in pre-market trading on the report, and the report also lifted shares of most other major builders ahead of the market open as well.

Still, the company's statement said problems the industry faces have not yet passed.

"Market conditions continued to decline in our September quarter as inventory levels of both new and existing homes remained high while pricing remained very competitive," said a statement from Chairman Donald R. Horton.

"We also experienced reduced mortgage availability due to tighter lending standards, and buyers continued to approach the home buying decision cautiously. We expect the housing environment to remain challenging."

Horton's results come a day after the National Association of Home Builders' survey on its members confidence matched a record low level. It also comes on the same day that the Census Bureau reported that building permits fell to a 14-year low, although housing starts edged higher.

Horton is hardly the only homebuilder hit by the downturn in housing.

Of the nation's largest homebuilders, only luxury homebuilder Toll Brothers (Charts, Fortune 500), No. 6 in terms of revenue, has yet to report a quarterly loss in the current downturn, and analysts are forecasting a loss for its just-completed period after its preliminary results showed a sharp drop in the number of homes sold and an even steeper decline in prices.

The five larger builders all reported much larger-than-forecast losses in their most recent financial periods. Earlier this month Hovnanian Enterprises (Charts, Fortune 500), the nation's No. 7 builder by revenue, reported that the sales pace during October "significantly deteriorated" compared with recent months in most of its markets, as its preliminary results also showed a sharp rise in cancellations.

In October, credit rating agency Moody's downgraded the debt of No. 1 home builder Lennar (Charts, Fortune 500), No. 2 Centex (Charts, Fortune 500) and No. 4 Pulte Homes (Charts, Fortune 500) to junk bond status. To top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.