D.R. Horton Inc., the largest U.S. homebuilder by revenue, said earnings jumped 86 percent in the fiscal first quarter as the company was able to raise prices and deliver more houses.
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 Fort Worth, Texas-based company said in a statement today. That compares with a 30-cent average estimate of nine analysts, according to data compiled by Bloomberg.
“Housing market conditions continue to improve across most of our operating markets and our weekly sales pace has accelerated in January,” Chairman Donald R. Horton said in the statement. “We are well-positioned to capture demand in the spring selling season.”
The company’s shares climbed 7.5 percent to $22.50 at 9:50 a.m. New York time, the biggest gain in the 11-member Standard & Poor’s Supercomposite Homebuilding Index. D.R. Horton lost 3.8 percent in the 12 months through yesterday, compared with an 8.1 percent decline for the broader measure.
D.R. Horton, which historically has built houses for first-time buyers, 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.
“Higher prices, a richer mix and favorable sales leverage boosted gross margins,” Robert Wetenhall, an analyst with RBC Capital Markets LLC in New York, wrote in an e-mail yesterday. Wetenhall, who has a sector-perform rating on the builder, similar to a neutral, expected earnings of 29 cents a share.
The real estate recovery nationally has slowed as higher prices and mortgage rates reduce affordability. U.S. new-home sales fell more than expected in December, ending the industry’s best year since 2008 on a sour note. Purchases dropped 7 percent from the previous month to an annual rate of 414,000, the Commerce Department reported yesterday. For all of 2013, sales rose to 428,000.
Interest rates on 30-year fixed mortgages averaged 4.39 percent last week, up from a near-record low of 3.35 percent in May, Freddie Mac reported on Jan. 23.