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D.R. Horton (DHI) Q4 & FY21 View Trimmed, Supply Woes Exist

D.R. Horton (DHI) witnesses intense supply chain disruptions and a tight labor market in the fourth quarter of fiscal 2021.

This story originally appeared on Zacks

D.R. Horton, Inc. DHI has reduced its fourth-quarter fiscal 2021 guidance for homes closed, consolidated revenues and home sales gross margin. The company has been witnessing significant supply chain disruptions, including shortages and delayed delivery of certain building materials along with a tight labor market.

It now expects fiscal fourth-quarter homes closed within 21,300-21,700 compared with 23,000-24,500 expected earlier. For the full year of fiscal 2021, the company expects homes closed to increase 24-25% or 81,300-81,700 versus 83,000-84,500 projected earlier.

Owing to reduced closing volume, partially offset by an increase in the average sales price of homes closed, D.R. Horton now expects revenues between $7.7 billion and $7.9 billion compared with the prior projected range of $7.9-$8.4 billion. It now expects fiscal 2021 revenues to rise 35-36% from a year ago to $27.4-$27.6 billion versus the previous guidance of $27.6-$28.1 billion.

Nonetheless, gross margin is now expected within 26.5-26.8% for the fiscal fourth quarter compared with 26-26.3% expected earlier. The uptrend in gross margin expectation is primarily backed by strong new home demand and limited housing supply that are supporting pricing power across most of its operating footprint. The mixed pattern in housing fundamentals is likely to have a limited impact on D.R. Horton’s fiscal fourth-quarter earnings.

For fiscal 2022, it expects to grow homes closed at a double-digit percentage pace.

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On Sep 20, D.R. Horton and other industry biggies like PulteGroup, Inc. PHM, Lennar Corporation LEN, and Toll Brothers, Inc. TOL declined largely after the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released builder confidence data for September, which inched up one point to 76 from the prior month. NAHB Chairman Chuck Fowke noted that delivery times remain extended and the chronic construction labor shortage is expected to persist as the overall labor market recovers.

That said, D.R. Horton — which belongs to the Zacks Building Products - Home Builders industry and carries a Zacks Rank #3 (Hold) — remains optimistic about the industry’s prospects, given robust demand for single-family homes, declining material prices as well as low-interest rates.

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