Scale helps D.R. Horton, but competitive, capital-intensive industry keeps it from earning a moat.
D.R. Horton released its fourth-quarter results on Nov. 8, and shares closed down about 5% as the no-moat homebuilder missed consensus sales and EPS estimates by 1% and 3%, respectively. Despite the miss, we thought D.R. Horton had a great fiscal 2016 as homebuilding sales increased 12% over 2015 and homebuilding gross margin improved 70 basis points to 19.9%. We think D.R. Horton’s gross margin performance is notable given that many other homebuilders have struggled to maintain gross margins in...D.R. Horton is a homebuilding company. The company's business operations consist of homebuilding, a majority-owned residential lot development company, financial services and other activities. The company's financial services operations provide mortgage financing and title agency services to homebuyers in its homebuilding markets. The company's subsidiary, DHI Mortgage, provides mortgage financing services primarily to its homebuyers and generally sells the mortgages it originates and the related servicing rights to third-party purchasers. The company's subsidiary title companies serve as title insurance agents by providing title insurance policies, examination and closing services, primarily to its homebuyers.
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