D.R. Horton stock falls after posting mixed Q1 results

D.R. Horton posted mixed first quarter results, with earnings of $2.82 per share falling short of estimates. However, revenue of $7.7 billion topped Wall Street expectations. The homebuilder also raised the upper end of its 2024 revenue outlook. Yahoo Finance's Seana Smith and Brad Smith discuss the results.

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Editor's note: This article was written by Stephanie Mikulich

Video Transcript

SEANA SMITH: Let's also take a look at some of the homebuilders here, because homebuilder earnings are taking place this morning. We got D.R. Horton, that was out ahead of the bell. And look at those stock reaction and shares off just about 4%, and fell short of expectations. The cost of sales jumping 8%.

Now, the company did raise the upper end of its full year guidance, now expects revenue of between $36 billion and $37.3 billion. But talking about the fact that earnings fell short, we know higher mortgage rates have been a serious issue for the housing market, cooling a lot of that activity. The fact that existing home sales have fallen so significantly, people are not moving from the homes that they currently live in.

Yes, that is a benefit for some of these homebuilders like D.R. Horton, but to some extent, some of that activity that maybe we were expecting to see from some of these homebuilders isn't exactly playing out, given the fact that mortgage rates, while they have come down from the peak, still very, very high elevation levels compared to what they were a year or two years ago.

BRAD SMITH: Yeah, when you see a report like this come through where, I think, within our newsroom even, we were saying, OK, it looks like they beat on some of the very basic standards that the Street would set forward. You do a hotkey or a control or Command-- if you're using Apple out there-- Command-F for decrease. And you see the areas where they might have seen a little bit of hit.

One of those areas of decrease was the net income. Net income attributed to D.R. Horton in the first quarter, that was down by about 1%-- decreased 1%. One of the other areas, the backlog of homes under contract by the end of the year, that decreased to about 11%-- decreased 11%, excuse me, to 13,965 homes.

Why is that important? Well, it also, in that backlog, it gives you a sense of where they're seeing orders continue to flow in. You mentioned the backdrop that we're in within this housing environment and this housing economy right now.

And so if you do see any slippage in the backlog of homes or a kind of churn through-- easy churn through, it means that maybe not the same amount of orders are being added on. And that's just what we're seeing here. And that they may need to layer on in order to spur demand, more pricing mechanism, in order to bring buyers back into the market.

SEANA SMITH: Yeah, some incentives there. And also remember that this is a stock that's up, what, 64% I believe-- over 60% in the last year. So the fact that they did disappoint on some of those key metrics is why we're seeing such a reaction here in pre-market trading. Again, the stock did close up yesterday. But when you take a look at pre-market shares, it is under pressure here this morning.