DR Horton lowered his sales forecast. Investors are now waiting for the earnings from Lennar and KB Home.
(ticker: DHI) lowered its quarterly sales expectations. Shares are falling hard, just like
(KBH), which reports earnings this week.
sees home closings and sales in the current quarter lower than initially forecast. The company said in a press release that it now expects closures to be 21,500, in the middle of management’s guidance, down from an initial midpoint of 23,750. Revenue is now forecast at $7.8 billion, down from previous expectations of $8.15 billion.
For the full year 2021, the company now expects revenue of $27.5 billion, lower than an initial forecast of $27.85 billion. The weakness in revenues, the company said, was a shortage of building materials and labor, which left the company unable to meet “strong demand for new housing”.
However, the company’s bottom line is not expected to be affected as much as sales. Pricing is benefiting from strong demand and low supply, the company said, raising management’s forecast for the current quarter of gross margin from 26.15% to 26.65%. The company therefore maintains its earnings per share expectation.
Analysts had expected earnings per share of $3.44 for the quarter.
The stock fell just over 4% Monday, worse than the 2% drop in the S&P 500. Not only is management’s warning bad for the stock, but the broader market is concerned about the macroeconomic implications of debt-laden Chinese real estate developers.
Meanwhile, Lennar and KB Home make a profit on Tuesday and Wednesday respectively. Analysts expect Lennar’s quarterly revenue and earnings per share to be $7.1 billion and $3.24. For KB Home, analysts are looking for revenue and earnings per share of $1.6 billion and $1.63. Their shares fell 4.5% and 5.1% on Monday.
On the upside, the worst pain for investors in the three stocks is over. DR Horton, Lennar and KB Home saw their shares fall 8.5%, 8.2% and 3.7% respectively in the past month. “While we expect order/closure risks to create the main risk, we feel that investor expectations have already been calibrated lower, creating a trickier setup [into earnings],” writes Mike Dahl, an analyst at RBC.
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