D.R. Horton Earnings: Fiscal Second-Quarter Results Solidly Above Our Expectations; FVE Increased

D.R. Horton’s fiscal second-quarter (ended March 31) results exceeded our expectations as the no-moat-rated homebuilder’s affordable price points (relative to both other builders and the existing home-sale market) and ample inventory of completed unsold homes (or speculative homes) have attracted more buyers. D.R. Horton delivered 22,548 homes during the quarter, handily above management’s guidance of 20,000-20,500 homes, due to stronger-than-expected demand for its spec homes. Management said 54% of homes were sold and closed during the quarter, versus the historical average of 35%-40%. D.R. Horton ended the quarter with 27,600 unsold homes in inventory, of which 7,300 were completed. We think a disciplined speculative building strategy is an effective tactic for homebuilders considering the supply-constrained existing home-sale market.