Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
D.R. Horton Sticks With Caution [TheStreet.com]
Summary: D. R. Horton, the largest homebuilder in America, managed to beat Q4 earnings estimates despite a 51% drop in profits by closing more home sales than expected in the quarter. Investors rewarded the news by bidding up the stock 7.5% to $24.05, but the company warned that the market is continuing to deteriorate. Horton earned $277.7 million in the quarter, or $0.88/share, down from $563.8 million, or $1.77/share, a year earlier. Analysts were expecting $0.69. Revenue fell 4% to $4.8 billion, ahead of analysts' $3.93 billion estimate. Management hopes to protect Horton from the downturn by restricting speculative home starts (homes built without a buyer in place) from the current 50% of its inventory to the low 30% range. It also plans to use most of its free cash flow next year to pay down debt and strengthen the balance sheet rather than buy new land.
Related links: Media coverage: Bloomberg • Newsday. Commentary: Housing Stocks' Recent Runup -- Sustainable? • The NAR Tries to Sell the Lack of Home Sales • Housing Stocks: Watching the RSI • Housing: What Does "Return to Mean" Really Mean?.
Potentially impacted stocks and ETFs: D.R. Horton Inc. (NYSE:DHI) • Competitors: 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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