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Key Takeaways
- Homebuilder stocks lost ground Tuesday after D.R. Horton Inc. missed profit estimates, citing incentives and lower prices it offered to draw in buyers.
- D.R. Horton’s margins were lower than expected as it tried to keep costs down with mortgage rates the highest they’ve been in several years.
- D.R. Horton raised its outlook for 2024 home sales, anticipating a rise in demand even with high borrowing costs.
Homebuilder stocks tumbled Tuesday after D.R. Horton Inc. (DHI), the largest U.S. homebuilder by revenue, reported profit short of forecasts after offering incentives and lowered prices to entice buyers. D.R. Horton shares were down close to 10% in intraday trading, while shares of Lennar (LEN) lost more than 4%, and PulteGroup (PHM) dropped over 5%.
D.R. Horton posted first-quarter fiscal 2024 earnings per share (EPS) of $2.82, while analysts were looking for $2.88. Revenue was up 6% from a year earlier to $7.73 billion, beating forecasts.
D.R. Horton and its rivals have been taking steps to lower costs for buyers squeezed by high mortgage rates, and those have hurt margins. D.R. Horton said its gross home sales profit margin was 22.9%, lower than its previous estimate of 23.7% to 24.2%.
The company said it anticipates current-quarter gross margins to be in the range of 22.6% to 23.1%, as it expects to keep its incentive levels high because of continued challenges to affordability for home buyers.
D.R. Horton said homes closed in the first quarter rose 12% to 19,340, and the company boosted its outlook for 2024 home sales to 87,000 to 90,000 from 86,000 to 89,000, as it sees demand increasing even with high borrowing costs.
Shares of D.R. Horton were 9.6% lower at $142.62 per share as of about 1:40 p.m. ET Tuesday, but even with that loss, they were up 49% from a year ago.
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