New York, NY, July 13, 2006--D.R. Horton said on Thursday that quarterly orders fell 4.4 percent, prompting the company to slash its forecast as the largest home builder succumbed to a deteriorating market.
Not even price cuts could save Horton from the forces of higher mortgage rates and a rising inventory of unsold homes.
"It's pretty brutal out there," JMP Securities analyst Jim Wilson said. "The strategy they're trying is to move product no matter what it takes. Their margins are getting clobbered."
The news sent Horton's shares down by nearly 9 percent in after-hours trading on the Inet brokerage system and swept other home builders along with it.
KB Home shares were off 3.5 percent at $40.20 and Toll Brothers Inc., were off 2.4 percent at $23.97
Horton's shares have lost more than half their value since last year.
In the fiscal third quarter ending June 30, orders for new homes fell to 14,316 from 14,980 a year earlier. The value of the new orders fell even more, down 7.4 percent in the quarter ended June 30 to $3.83 billion.
"The current home sales environment is characterized by an increase in both existing and new homes available for sale, higher than normal cancellation rates and an increase in the use of sales incentives in many of our markets," Donald Horton, the company's chairman said.
The company said it sees the third-quarter earnings of 93 cents per share, well below the $1.30 analysts had expected, according to Reuters Estimates. The new outlook includes write-offs totaling 11 cents per share.
Horton also cut its outlook for the fiscal year ending in September to at least $3.65 per share down from its prior forecast of $5.25 to $5.35. Analysts expected Horton to post earnings of $4.96 for the year, according to Reuters Estimates.
Horton, based in Fort Worth Texas, also reduced the forecast for the number of homes it expects to sell in the year to 50,000 down from 58,000.
The Southwest was the only one of Horton's five regions to see orders rise, up 12 percent.
