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Horton Sees Drop in Orders for Homes

July 14, 2006|From Reuters

D.R. Horton Inc., the largest U.S. home builder, said Thursday that fiscal third-quarter orders fell 4.4%, prompting the company to slash its forecast amid a deteriorating market.

Not even price cuts could save Fort Worth-based Horton from the effects of higher mortgage rates and a rising inventory of unsold homes.

"It's pretty brutal out there," JMP Securities analyst Jim Wilson said. "The strategy they're trying is to move product no matter what it takes. Their margins are getting clobbered."

The news, released after the stock market closed, sent Horton shares down nearly 9% in after-hours trading, to $20.80, from their close of $22.86 during the regular session. Other home builders suffered declines too. Horton shares have lost more than half their value since last year.

In the fiscal quarter ended June 30, orders for new homes fell to 14,316 from 14,980 a year earlier. The value of the new orders fell even more, down 7.4% in the quarter to $3.83 billion.

"The current home sales environment is characterized by an increase in both existing and new homes available for sale, higher-than-normal cancellation rates and an increase in the use of sales incentives in many of our markets," said Donald Horton, the company's chairman.

The company said it expected earnings of 93 cents a share, well below the $1.30 that analysts had expected, Reuters Estimates said. The new outlook includes write-offs totaling 11 cents a share. Horton also cut its outlook for the fiscal year.

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