D.R.Horton, Inc.

Construction

26 Jan

Home for every stage in life.®

D.R. Horton, Inc. is a home construction company with operations in 109 markets in 33 states across the United States.

The Company is engaged in the construction and sale of high-quality homes through its diverse brand portfolio which includes D.R. Horton, Emerald Homes, Express Homes, and Freedom Homes with sales prices generally ranging from $200,000 to over $1,000,000.

Through its mortgage, title, and insurance subsidiaries, D.R. Horton provides mortgage financing, title services, and insurance agency services for its homebuyers.

The Company also constructs and sells both single-family and multi-family rental properties and is the majority owner of Forestar Group Inc., a national residential lot development company.

Employees: 13,500 +

Revenue: $33.480bn for FY2022

HQ Location: Arlington, Texas, U.S.

What they do:

They help anyone from first-time homebuyers to empty nesters, by providing people with homes for every stage in life.
Their highly-trained, market experts provide unique, personalized services tailored to individual needs.
They pride themselves on the quality of construction they put into every home and the peace of mind that comes with a premium-backed warranty.
They have delivered more than 965,000 homes to the nation’s customers since their company’s inception in 1978.
Their team of operating experts is spread across the nation in 33 states and 109 markets.

Their vision and priorities:

Homeownership for everyone, a home for every stage in life.
They focus on providing compelling value to their customers by offering quality homes at affordable price points across their family of brands and being the leading builder in each of those markets.

Financial and Business Goals

Invest capital to enhance the long-term value of the company, including returning capital to their shareholders through both dividends and share repurchases on a consistent basis
Goals for Q2:
- Consolidated revenues in the range from $6.3 billion to $6.7 billion
- Homes closed between 16,000 homes and 17,000 homes
- Home sales gross margin in the range of ~20% to ~21%

Things to know right now

D.R. Horton, Inc acquired the homebuilding operations of Riggin Custom homes in Fayetteville, Arizona
The acquisition includes approximately 3,000 lots, 170 homes in inventory, and 173 homes in sales order backlog.
21st consecutive year as the largest homebuilder in the United States.
Over the last five years, they have grown their revenues by 138% and their earnings per share by 503%, while also generating $7.5 billion of cumulative homebuilding cash from operations, more than doubling their book value per share, maintaining homebuilding leverage below 20% and significantly increasing their returns on inventory and equity.
Message from Donald R. Horton, Chairman of the Board
“Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty. While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable.
“We are well-positioned to navigate changing market conditions with our experienced operators, diverse product offerings, and flexible lot supply and are focused on turning our inventory to maximize returns and capital efficiency in each of our communities. The strength of our balance sheet, liquidity, and low leverage provide us with significant financial flexibility, and we plan to maintain our disciplined approach to investing capital to enhance the long-term value of our company, including returning capital to our shareholders through both dividends and share repurchases on a consistent basis.”

Business Segments:

The Company’s operating segments are its 80 homebuilding divisions, its majority-owned Forestar residential lot development operations, its financial services operations, its rental operations, and its other business activities.
The Company’s reporting segments are its homebuilding reporting segments, its Forestar lot development segment, its financial services segment, and its rental operations segment.
- Homebuilding
  The Company’s homebuilding divisions design, build and sell single-family detached homes on lots they develop and on fully developed lots purchased ready for home construction. To a lesser extent, the homebuilding divisions also build and sell attached homes, such as townhomes, duplexes, and triplexes. Most of the revenue generated by the Company’s homebuilding operations is from the sale of completed homes and to a lesser extent from the sale of land and lots.
  The homebuilding operating segments are aggregated into six reporting segments. The reporting segments are the states in which the Company has homebuilding operations which include:
  - Northwest: Colorado, Oregon, Utah, and Washington
  - Southwest: Arizona, California, Hawaii, Nevada, and New Mexico
  - South Central: Arkansas, Oklahoma, and Texas
  - Southeast: Alabama, Florida, Louisiana, and Mississippi
  - East: Georgia, North Carolina, South Carolina, and Tennessee
  - North: Delaware, Illinois, Indiana, Iowa, Kentucky, Maryland, Minnesota, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia, and West Virginia
- Forestar
  The Forestar segment is a residential lot development company with operations in 52 markets across 20 states. The Company’s homebuilding divisions acquire finished lots from Forestar in accordance with the master supply agreement between the two companies.
- Financial Services
  The Company’s financial services segment provides mortgage financing and title agency services to homebuyers in many of the Company’s homebuilding markets. The segment generates the substantial majority of its revenues from originating and selling mortgages and collecting fees for a title insurance agency and closing services. The Company sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers.
- Rental
  The Company’s rental segment consists of multi-family and single-family rental operations. The multi-family rental operations develop, construct, lease, and sell residential rental properties. The single-family rental operations primarily construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes.
- Other
  The Company also engages in other business activities through its subsidiaries. The Company conducts insurance-related operations, owns water rights and other water-related assets, owns non-residential real estate including ranch land and improvements and owns and operates energy-related assets. The results of these operations are immaterial for separate reporting and therefore are grouped together.

Their Competitors

NVR
Lennar
KB Home

Their financial calendar

Q1: October-December - Earnings 24th January 2023

Q2: January-March Around 26th April 2023

Q3: April-June - Around 21st July 2023

Q4: July-September - Around 30th September 2023

Next Earnings Report:

26th April 2023

Positives from the last earnings report:

Homebuilding Segment
- Net income attributable to D.R. Horton of $958.7 million or $2.76 per diluted share
- Consolidated pre‐tax income of $1.3 billion, with a pre‐tax profit margin of 17.5%
- Consolidated revenues increased 3% to $7.3 billion
- Homes sales revenue increased 1% to $6.7 billion on 17,340 homes closed
- Rental operations pre‐tax income of $110.3 million on $327.5 million of revenues from sales of 694 single‐family rental homes and 300 multi‐family rental units
- Repurchased 1.4 million shares for $118.1 million
Forestar
- Sold 2,263 lots and generated $216.7 million in revenue compared to 4,516 lots and $407.6 million of revenue in the prior year's quarter
- Forestar’s pre-tax income in the first quarter of fiscal 2023 decreased 48% to $27.9 million with a pre-tax profit margin of 12.9% compared to $53.5 million of pre-tax income and a 13.1% pre-tax profit margin in the same quarter of fiscal 2022.
Rental Operations
- Generated $110.3 million of pre-tax income on revenues of $327.5 million in the first quarter of fiscal 2023 compared to $70.1 million of pre-tax income on revenues of $156.5 million in the same quarter of fiscal 202
- The company sold 694 single-family rental homes for $228.0 million compared to 226 homes sold for $80.3 million in the prior year's quarter.

Challenges from the last earnings report:

Homebuilding Segment
- Overall the company has seen a bit of uncertainty in buying mainly due to significant increases in mortgage interest rates and general economic uncertainty.
- Net income attributable to D.R. Horton in the first quarter of fiscal 2023 decreased 16% to $958.7 million compared to $1.1 billion in the same quarter of fiscal 2022.
- Homes closed in the quarter decreased 6% to 17,340 homes compared to 18,396 homes closed in the same quarter of fiscal 2022.
- Net sales orders for the first quarter decreased 38% to 13,382 homes and 40% in value to $4.9 billion compared to 21,522 homes and $8.3 billion in the same quarter of the prior year.
- The Company’s cancellation rate (cancelled sales orders divided by gross sales orders) for the first quarter of fiscal 2023 was 27% compared to 15% in the prior-year quarter.
- The Company's sales order backlog of homes under contract decreased 46% to 15,759 homes and 44% in value to $6.2 billion compared to 29,347 homes and $11.1 billion.
Forestar
- Their pre-tax income in the first quarter of fiscal 2023 decreased 48% to $27.9 million
Financial Services
- Revenues were $137.0 million compared to $184.3 million in the same quarter of fiscal 2022.
Rental Operations
The company sold 300 multi-family rental units for $99.5 million compared to 351 units sold for $76.2 million during the prior year's quarter.