D.R. Horton, largest U.S. home builder, halved its dividend and posted a quarterly loss of $1.3 billion Tuesday as it wrote down the value of its land and unsold homes and cut prices to boost sales, especially in California.
The aggressive selling led to sharply lower gross margins, which drove an operating loss, JP Morgan analyst Michael Rehaut said in a research note.
D.R. Horton's home sales fell by a third and orders declined by nearly 25 percent as the slump in the housing market took a toll.
The loss for the fiscal second quarter ended March 31 amounted to $4.14 per share, compared with a year-earlier profit of $51.7 million, or 16 cents per share.
"Given the current weak environment and still elevated inventory levels, we believe further home price deflation and large land charges remain for D.R. Horton and the industry," Rehaut wrote.
Home-building revenue fell 40 percent to $1.62 billion.
The company closed on the sale of 6,719 homes in the quarter, down 31.4 percent from a year earlier. The average selling price fell 7.7 percent to $237,803.
Net orders fell 24.6 percent to 7,528, while order value tumbled 36 percent to $1.7 billion, the Fort Worth, Texas-based company said.
During quarter, Horton took an income tax expense of $714.3 million for the value of deferred tax assets it may not be able to use in full to offset taxes on future earnings.
"Although market conditions in the home-building industry remain challenging, we continue to focus on reducing inventory and generating cash flow from operations," Chairman Donald Horton said in a statement.
The U.S. housing sector is experiencing its worst slump in decades, with foreclosures rising and home prices falling. To navigate the downturn, U.S. builders have shifted their focus to survival, selling off the excess land and inventory accumulated during the boom times of 2002 to 2006.
"All the home builders, including Horton, are just in hunker down mode where they're trying to generate cash, to survive through this downturn, and I think Horton will," Weiss Research analyst Mike Larson said.
D.R. Horton said it ended the quarter with an inventory of 15,100 unsold homes, down 13 percent from the end of December.
It cut selling, general and administrative expenses by $88 million in the quarter compared with a year earlier.
The company cut its quarterly cash dividend to 7.5 cents a share from 15 cents. The lower dividend is payable on May 29 to stockholders of record on May 19.
D.R. Horton generated $450 million of cash flow from operations during the quarter. It said that in the fiscal first half it narrowly exceeded its cash flow goal of $1 billion for the year. It ended the quarter with a home-building cash balance of $519 million.
D.R. Horton shares were down 19 cents to $15.78 in morning trade on the New York Stock Exchange.