D.R. Horton, Inc. (NYSE:DHI) declined the most in three months after it reported that its Express Homes division is expected to contribute more in sales. It indicates that the company may face pressure on profit margins in the near term. The gross margins in 3Q are expected to be in a range of 19.5% to 20%. In the second quarter, it was 19.7%, down about 250 basis points compared to same period a year ago. The company also expects the average selling prices to decline in the current quarter.
The expert view
Bill Wheat, Chief Financial Officer of D.R. Horton, said that as express grows it is reverse for the ASP. It is one of the toughest things to forecast and tell where it is going to be QOQ. After the report, the shares declined 5.4% to $27.03. It was the biggest drop since January 15.
The company was among the builders to indicate it was increasing sales volume compared to prices to attract more first-time buyers. The new home sales in the United States have been slow to pick up from the housing crash. It was applicable even when the economy recorded growth in job market. The problem was that many potential buyers cannot get a mortgage or was unable to afford the cost of construction.
D.R. Horton net income in the second quarter surged to 40 cents a share, from 38 cents a share recorded in the same period a year earlier. The analysts have expected the net income to come at 38 cents a share. The orders grew to 11,135 homes compared with 8,569 houses a year earlier. The revenue from Homebuilding jumped to $2.34 billion from $1.7 billion. The revenue from Express Homes contributed 8% in the total revenue while it accounted for 18% in new sales.