NEW YORK -(Dow Jones)- D.R. Horton Inc. (DHI) swung to a fiscal first-quarter loss as the home builder was hurt by sharply lower home-sale revenue in the absence of a federal home-buyer tax credit.
The industry has seen substantial softness since the credit of up to $8,000 expired April 30. It also continues battling competition from foreclosed and existing homes, high unemployment and weakened home values preventing many would-be buyers from acting. On Wednesday, the Commerce Department said 2010's new-home sales were the lowest since record-keeping started in 1963.
"As we expected, our first quarter was challenged," said Chief Executive Donald Tomnitz in a mid-morning conference call with analysts and investors. "The fundamental drivers of demand for the homebuilding industry, the overall economy, job growth and consumer confidence, are still weak."
For the quarter ended Dec. 31, Texas-based D.R. Horton, one of the nation's largest home builders, reported a loss of $20.4 million, or 6 cents a share, against a year-earlier profit of $192 million, or 56 cents a share.
The results weighed on the sector early Thursday, with no major builder showing a gain. Shares of D.R. Horton fell more than 3% at the open. The stock recently traded down 1.4% at $13.05.
The latest period included $8.4 million in charges for inventory and land option write-downs. The prior year included a $149.2 million tax benefit and $1.2 million in charges related to inventory and other write-downs. Revenue decreased 31% to $767 million.
Analysts polled by Thomson Reuters most recently forecast a loss of 3 cents on revenue of $800 million.
Gross margins fell to 15.6% from 17% in the fourth quarter, which concerned several analysts. "We expect the trend of sequentially lower margins to continue, given the lack of demand for new homes and higher incentives needed to capture orders," noted Dan Oppenheim, a Credit Suisse builder analyst.
Orders fell 17%, while the cancellation rate was 28%, up from 26% a year earlier.
Closings decreased 34% to 3,637 homes.
"We expected coming into this quarter that the road ahead would be tougher than the road behind for D.R. Horton given that its first-time buyer focus and spec strategy was more or less tailor made for the tax-credit supported environment of last year," Michael Widner, a Stifel Nicolaus builder analyst, wrote in a client note. "With that crutch pulled out we anticipated a bit of slippage. That slippage was apparent in the quarter's results, which slid a touch more than we had expected on order volumes, deliveries, and gross margins."
Late Wednesday, builder Ryland Group Inc. (RYL) swung to a fourth-quarter loss of $19.1 million, or 43 cents a share, compared with a profit of $39 million, or 88 cents a share, a year earlier. Its shares fell 2.4% to $17.80 in recent activity.
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