DHI
The good news: the numbers weren’t ugly
D.R. Horton came in with a Q3 that beat Wall Street on both earnings and revenue. Earnings landed at $3.20 a share versus $3.06 expected, while revenue rose to $9.23 billion and edged past consensus. Not exactly a face-plant.
The not-so-good news: buyers are still dragging their feet
The bigger headline is what happened underneath the shiny top-line beat. Management cut its full-year revenue outlook to $32.5 billion–$33.0 billion from $33.5 billion–$34.5 billion, and it also trimmed its home-closing forecast. In plain English: people are still hesitating before signing up for the biggest purchase of their lives, which is awkward for a homebuilder the size of a small economy.
Executive Chairman David Auld pointed to affordability pressure and cautious consumer sentiment, and the company said incentives are likely to stay elevated through the fourth quarter. Translation: D.R. Horton may need to keep using discounts and sweeteners to keep traffic moving.
Margins, buybacks, and the “we’re still fine” tour
There were some bright spots. Home closings rose 4%, operating cash flow was solid, and the company kept throwing cash back at shareholders with $615.7 million in buybacks during the quarter and a 45-cent dividend. But cancellations also rose to 20% from 17%, which is the kind of stat that makes you squint a little harder at the housing recovery story.
Big picture: D.R. Horton is still profitable and still buying back stock, but the company’s guidance cut is a reminder that the housing market can’t just be carried by wishful thinking and a few rate-cut dreams.