4. D.R. Horton, Inc. (NYSE:DHI)
Number of Hedge Fund Holders: 62
On Tuesday, during Mad Money’s episode, Cramer said that D.R. Horton, Inc. (NYSE:DHI) stock “absolutely imploded” despite the fact that the company is a big operator in its industry.
“This excellent operator which builds predominantly starter homes, if you can call $400,000 a starter home, reported a clear top and bottom line miss with weaker-than-expected revenues, 5% revenue shrinkage, and earnings down 12% year-over-year. Ouch. But as bad as the headline numbers were, it was the forward-looking metrics that really hurt.”
Cramer noted that the company reported a modest year-over-year increase in net sales orders, rising just 1% to slightly over 19,000 units. He highlighted that Wall Street had forecasted orders to exceed 20,000, indicating a shortfall in expectations. Additionally, Cramer remarked that the value of these net sales orders declined by 2%, falling short of forecasts. Even more concerning was the significant drop in the company’s sales order backlog, which decreased by 19%.
“Horton’s forecast for the 2025 fiscal year, the 12-month period that ends next September, came in pretty light. They’re expecting 90,000 to 92,000 closings, the analysts were looking for 94,000. They’re talking $36-$37.5 billion in revenue, Wall Street was looking for $39 billion. That’s a big miss. Basically, Horton’s projecting closings up just 1.5%… Those are not the numbers that I wanted to see from a home builder in a world where the Fed’s cutting rates.”
Cramer expressed no surprise at the stock’s significant drop of over 7% on Tuesday, noting that it had actually fallen even further at one point. He remarked that the decline was justified, suggesting that the stock could have seen an even steeper fall. Cramer anticipates a wave of downgrades in the days ahead.
“On the conference call, CEO Paul Romanowski pinned the weaker number on “the volatility of rates” and buyers’ expectations that rates will be lower next year. In fact, management referred to a pause three separate times in the conference call, with COO Michael Murray describing a very choppy selling environment in the quarter with a buyer that seems on pause until mortgage rates come down. It makes sense to me. And remember, these guys are really good operators. We’re not dealing with some company that gets it chronically wrong. We’re talking about something that gets it chronically right.”
D.R. Horton (NYSE:DHI) has a track record of closing over 1,100,000 homes and operates in 125 markets across 36 states. For fiscal 2025, its management has projected revenues between $36 billion and $37.5 billion, along with plans for closing between 90,000 and 92,000 homes. This outlook shows a recalibration of previous targets, considering the ongoing challenges in the housing market.
Despite these adjustments, D.R. Horton (NYSE:DHI) management emphasizes a commitment to strategic land acquisitions and careful inventory management, aiming to sustain growth and optimize operations across different regions. Management also highlighted the importance of maintaining adaptable financial operations to address fluctuations in interest rates and issues related to affordability.
