D.R. Horton Gains After Turning Second Profit From Homebuying Tax Credit

D.R. Horton Inc., the second-largest U.S. homebuilder by revenue, climbed in New York trading after reporting its second straight quarterly profit.

Customers taking advantage of a federal tax credit helped push net income to $11.4 million, or 4 cents a share, for the quarter ended March 31, compared with a net loss of $108.6 million, or 34 cents, a year earlier, the Fort Worth, Texas- based company said today in a statement. The builder beat the average of 11 estimates in a Bloomberg survey predicting roughly break-even results.

“We still view DHI as the best-positioned builder in the space with the right mix of geography and product,” James Wilson, an analyst with JMP Securities LLC in San Francisco, wrote in a note to investors. He rates the shares “market outperform.”

Government subsidies including a tax credit of as much $8,000 for first-time homebuyers helped put a floor under the U.S. housing market after more than four years in decline. Nationwide, new home sales jumped 27 percent in March from the previous month, the biggest increase since record keeping began in 1963, the Commerce Department said last week.

D.R. Horton’s shares gained 45 cents, or 3.2 percent, to $14.69 at 4:28 p.m. in New York Stock Exchange composite trading.

“Market conditions in the homebuilding industry are still challenging,” Chairman Donald R. Horton said in today’s statement. “However, new home inventory remains low, interest rates are favorable and housing affordability is near record highs.”

The builder’s revenue rose 16 percent to $896.8 million. Net sales orders climbed 55 percent to 6,438 homes valued at $1.3 billion.

About 80 percent of the closings were ”spec” homes built in anticipation of customer orders, a strategy that paid off as buyers rushed to beat the tax deadline, President and Chief Executive Officer Donald R. Tomnitz said in a conference call with investors today. Tomnitz said he expects sales to continue after the tax expires.

“We have continued to sell strong on these specs through the month of April,” he said. “If we see strong sales, we will probably put some more specs out there to meet that demand.”

Share Gain

D.R. Horton shares have climbed 35 percent this year, exceeding the 26 percent advance in the Standard & Poor’s Supercomposite Homebuilding Index.

“We expect shares to trade up even after the strong run,” Goldman Sachs Group Inc. analyst Joshua Pollard wrote in a note to investors today. “In a year when only half of the builders will make money, we believe the best investing strategy is to ‘buy the profits.’”

Pollard rates D.R. Horton “buy/attractive.”

Homebuilders including D.R. Horton, Lennar Corp. and Meritage Homes Corp. have said they expect to be profitable this year for the first time since house prices peaked in 2006. Sales are rising and the companies are reporting fewer writedowns.

D.R. Horton’s goal is to be profitable every quarter and for the entire year, Tomnitz said today, a vow he first said in public on Feb. 2. That day, the company reported its first quarterly profit since 2007.

Meritage, Ryland Group Inc., M.D.C. Holdings Inc. and Standard Pacific Corp. have all reported narrower quarterly losses or a return to profitability this month.

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.

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