D.R. Horton Climbs After Reporting That Earnings Doubled

D.R. Horton Inc., the largest U.S. homebuilder by volume, rose to its highest level in almost six years after reporting that earnings more than doubled in the fiscal first quarter.

Net income was $66.3 million, or 20 cents a share, for the three months ended Dec. 31, up from $27.7 million, or 9 cents, a year earlier, the Fort Worth, Texas-based company said in a statement today. The average estimate of 19 analysts in a Bloomberg survey was for earnings of 14 cents a share.

Low mortgage rates and a shrinking inventory of existing residences on the market are fueling sales of new houses. U.S. builders sold 367,000 homes in 2012, the most in three years, the Commerce Department said last week. Under Chief Executive Officer Donald J. Tomnitz, D.R. Horton has focused on using its size advantage to control costs and increase market share by accelerating land purchases ahead of smaller competitors.

The builder set “a high bar for the peer group during this round of earnings,” Vincent Foley and Cedric Morris, analysts with Barclays Plc, wrote in a research note today. “D.R. Horton improved on its solid 2012 results and is well-positioned to benefit from increased demand during this year’s spring selling season.”

The shares gained 12 percent to $23.82 at the close of trading in New York, the highest since March 2007 and the best performance among the 11 members of the Standard & Poor’s Supercomposite Homebuilding Index, which increased 3 percent.

Revenue Rises

D.R. Horton’s homebuilding revenue for the quarter rose 39 percent from a year earlier to $1.23 billion. Orders jumped 39 percent to 5,259 homes. The company’s contract backlog, an indication of future sales, rose 80 percent to $1.76 billion.

The builder is adding homes and communities to take advantage of the increasing demand, which was strong in both the entry-level and move-up segments, Tomnitz said today on a conference call with analysts.

“We are anticipating a good spring selling season,” Horton said. “We’ve put a significant amount of capital to work this quarter by increasing our investments in homes under construction, finished lots, land, and land development. D.R. Horton is in the best position it has ever been in its 35-year history.”

Adam Rudiger, an analyst with Wells Fargo & Co. in Boston, said D.R. Horton’s order growth beat his estimate for a 20 percent increase, while gross margins, a measure of profitability, also were better than he forecast.

“The combination of better margins and orders suggests the order outperformance did not come at the expense of overly promotional activity,” he wrote in an e-mail to clients. “Further, we believe DHI’s willingness and ability to so significantly build inventory heading into the all-important spring selling season positions the company well to take share from those less willing to build” homes on a speculative basis.