D.R. Horton Inc. (DHI), the largest U.S. homebuilder by revenue, rose the most in a year after reporting that it’s charging more for houses and that sales are strengthening heading into the busiest season for demand.
The Fort Worth, Texas-based builder provided an early look at the spring selling season, saying that sales accelerated during the first few weeks of January. Across the U.S., new-home purchases dropped 7 percent in December from the previous month, suggesting that rising prices and mortgage rates discouraged buyers at the end of 2013, Commerce Department figures released yesterday showed.
“We’re right on the cusp of a strong spring selling season, and for my own personal perspective, I think the spring selling season has started a little early, for our company,” Chief Executive Officer Donald Tomnitz said during a conference call today. “That’s a very positive thing.”
The busiest period for new-home sales traditionally starts the weekend after the Super Bowl football championship, being played Feb. 2.
D.R. Horton shares gained 9.8 percent to $23 at the close of New York trading, the biggest increase since January 2013 and the best performance among the 11 companies in the Standard & Poor’s Supercomposite Homebuilding Index, which jumped 5.3 percent. D.R. Horton has gained 7.9 percent in the past 12 months, compared with a 1.2 percent decline for the index.
“January sales seem to be accelerating to a degree and the spring selling season may be getting off to a good start,” Robin Diedrich, an analyst with Edward Jones & Co. in St. Louis, who has a buy rating on the stock, said in a telephone interview. “That’s definitely what investors are focusing on and why the stock is doing pretty well today.”
D.R. Horton’s net income rose to $123.3 million, or 36 cents a share, in the three months ended Dec. 31, from $66.3 million, or 20 cents, a year earlier, the company said in a statement today. That compares with a 30-cent average estimate of nine analysts, according to data compiled by Bloomberg.
The builder’s performance in early January shouldn’t be considered a measure of the broader U.S. new-home market, which is likely to be “sluggish” over the next six months, said Alex Barron, senior research analyst for Housing Research Center in El Paso, Texas, who has a buy rating on the company’s shares.
“Horton stands out far and above everybody else in the great job they’ve done picking up cheap land,” Barron said in a phone interview. “Part of their enthusiasm is company specific and isn’t entirely reflective of the entire housing market.”
D.R. Horton, which historically has built houses for first-time homeowners, has been targeting more move-up buyers who can pay higher prices, while using its large size to reduce costs and increase profitability.
Homebuilding revenue in the first-quarter rose to $1.63 billion from $1.22 billion a year earlier. The company sold 6,188 homes, up from 5,182. Orders increased 4 percent to 5,454.
The average sales price gained 10 percent to $275,600. The value of properties under contract rose 20 percent to $2.1 billion.
D.R. Horton’s gross margin on home sales widened by 3.5 percentage points to 22.3 percent, the company said. Pretax profit as a proportion of revenue rose by 2.9 percentage points to 11.4 percent.
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