D.R. Horton's Net Slides
Amid Housing Slump

Home builder D.R. Horton Inc. on Tuesday posted lower profit for its fiscal fourth quarter amid land-related writedowns of $199.2 million, but the results exceeded Wall Street's expectations.

The Fort Worth, Texas, company reported no signs of a rebound in the troubled housing market and offered no outlook for fiscal 2007. Market conditions remain "challenging" in the home-building industry, Donald Horton, the company's chairman, said in a statement. The company's orders fell 25%, which is better than many of its rivals.

Net income sank to $277.7 million, or 88 cents a share, in the three months ended Sept. 30, from $563.8 million, or $1.77 a share, a year earlier. Revenue fell 3.9% to $4.9 billion from $5.1 billion. The most recent quarter's results included a charge of 39 cents a share, related to writedowns on land, land options and land reacquisition costs. Still, the results exceeded Thomson First Call's estimate of 69 cents a share on revenue of $3.93 billion

The land writedowns were D.R. Horton's first. Other builders have been taking charges related to land for the past couple of quarters as deteriorating housing conditions and values have made certain land parcels no longer financially viable to build homes on.

Banc of America analyst Dan Oppenheim expects D.R. Horton to take more land-related writedowns in future quarters. He said D.R. Horton's results were better than expected because home closings held up relatively well and "represented 26 cents a share of upside." In the quarter, closings fell 7.3% to 17,261.

The higher-than-expected closings appeared to indicate that D.R. Horton was slightly more successful than other builders at stemming the tide of cancellations. This was partly offset by the company's gross profit margins, which came in about seven cents a share lighter than expected, he said.

Mr. Oppenheim said he wasn't surprised that the company didn't offer guidance for fiscal 2007, given the uncertain market conditions. "We expect that they will wait as long as possible before providing it due to the lack of visibility," he said. Mr. Oppenheim doesn't hold shares in D.R. Horton, but his firm has had an investment-banking relationship with the company in the past 12 months.

For all of fiscal 2006, earnings fell 16% to $1.23 billion, or $3.90 a share, from $1.47 billion, or $4.62 a share, for fiscal 2005. Revenue grew 8.6% to $15.1 billion from $13.9 billion.

In early trading, shares of D.R. Horton were up $1.31, or 5.9%, at $23.69 on the New York Stock Exchange.

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