In an indication that the housing sector has yet to reach a bottom, D.R. Horton and Meritage Homes both posted lower quarterly sales yesterday. D.R. Horton reported net sales orders of $2.3 billion for fiscal Q1, nearly $1 billion below last year's figure and widely missing Street forecasts of $2.74 billion. Cancellations came in at 33% -- not good, but better than last quarter's 40%. Horton has resisted offering incentives but has recently been compelled to discount properties, a move that will hurt profit margins. Meritage reported net sales of $356 million in Q4, down precipitously from last year's $723 million. Q4 revenue was also down at $821 million versus $1.04 billion a year earlier, but this figure beat forecasts of $742.3 million. Neither company's shares took much of a hit on the news since the market had priced in its low expectations. Both Horton and Meritage are trading about 40% off their 12-month highs.
• Sources: Washington Post, Wall Street Journal
• Related commentary: D.R. Horton Beats Estimates but Advises Caution, Assessing the Homebuilder Stocks, Bursting the Housing Bubble, What Is Correct Way to Value Homebuilders?
• Potentially impacted stocks and ETFs: D.R. Horton, Inc. (NYSE:DHI), Meritage Homes Corp. (NYSE:MTH). Competitors: KB Home (NYSE:KBH), Centex Corp. (CTX), Lennar Corp. (NYSE:LEN), Pulte Homes Inc. (NYSE:PHM). ETFs: iShares Dow Jones US Home Construction (NYSEARCA:ITB), SPDR Homebuilders (NYSEARCA:XHB)
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