Shares of homebuilders slid Friday after D.R. Horton Inc. said revenue plunged, while analysts said the company wrote down more inventory than anticipated and expectations for the industry were unrealistically high.
D.R. Horton said its loss in its fiscal fourth quarter narrowed, despite a drop in revenue, as the company wrote down fewer costs.
Inventory writedown costs and other expenses totaled $192.6 million pretax in the latest quarter, compared with $1.1 billion in 2008. Still, that was wider than Wall Street expected.
Sales orders during the quarter rose 26 percent from last year, but more foreclosures, high inventories and rising unemployment remain a challenge for the industry, it said.
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The expected expiration of a federal tax credit for first-time homebuyers drove order volume above expectations, Stifel Nicolaus analyst Michael Widner wrote in a note to investors.
Earlier this month, Congress extended the credit, which would have expired Nov. 30 and is worth up to $8,000, to April 30. It also created a credit of up to $6,500 for would-be buyers who have owned their current homes for five years.
Preliminary results from Toll Brothers Inc. earlier this week signaled that Americans' demand for new homes is stronger, sending shares of other big U.S. homebuilders sharply higher. Toll said contracts for new homes rose 42 percent in its fiscal fourth quarter, even though the luxury builder had fewer communities than in the same period last year.
"While we found Toll's results to be solid we did not believe the strongly positive reaction for the rest of the sector, up 7.5 percent on the day on average, was warranted," Widner said, maintaining a "Sell" rating.
Shares of U.S. homebuilders dropped with the broader market Friday. In afternoon trading, D.R. Horton's stock sank $1.81, or 14.8 percent, to $10.44, while shares of Toll lost 51 cents, or 2.5 percent, to $20 and Beazer Homes USA Inc. fell 40 cents, or 4.1 percent, to $9.42.
Hovnanian Enterprises Inc. edged down 2 cents to $3.97; KB Home fell 49 cents, or 3.4 percent, to $14.13; Lennar Crop. slid 58 cents, or 4.1 percent, to $13.59; Ryland Group Inc. was down 77 cents, or 3.9 percent, to $18.84; Standard Pacific Corp. lost 14 cents, or 4.3 percent, to $3.10; Meritage Homes Corp. was 44 cents lower, or 2.4 percent, to $18.14; M/I Homes Inc. fell 25 cents, or 2.2 percent, to $11.27; and NVR Inc. shed $4.80 to $662.38.