Keefe Bruyette & Woods Comments On DR Horton, German American Bancorp Following Earnings Announcements

Keefe Bruyette & Woods views DR Horton's DHI FY2Q11 operating results as in-line. Orders and gross margins exceeded KBW's forecast, while closings and SG&A were modestly below. KBW reduces its 2H11 and 2012 EPS estimates to reflect a modestly more cautious sales and margin outlook. KBW maintains a Market Perform and $12 price target. The primary risks to KBW's rating and price target include a further deterioration in sales volumes or home prices. Additional risks include higher funding costs. Finally, an increase in mortgage rates could slow any modest recovery in the housing market. German American Bancorp GABC reported 1Q11 operating EPS of $0.38, which was ahead of KBW's estimate. Results this quarter were impacted by the company's acquisition of American Community Bancorp, however core underlying trends were positive. Following 1Q11 results, KBW is raising its 2011, 2012 and 2013 earnings estimates. The primary risks that could affect KBW's earnings outlook and PT include unexpected volatility of interest rates, very meaningful deterioration in credit quality due to further slowdown in economic activity and seasoning of the commercial loan portfolio, slower-than-anticipated balance sheet growth, and material margin pressure. DHI closed Friday at $12.44 GABC closed Friday at $17.45