Photogrpaher: Mike Fuentes/Bloomberg

D.R. Horton Profit Beats Estimates as Home Sales Jumped

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D.R. Horton Inc., the largest U.S. homebuilder by revenue, reported fiscal first-quarter earnings that beat estimates as sales jumped. The shares rose the most since October.

Net income was $142.5 million, or 39 cents a share, for the three months ended Dec. 31, compared with $123.2 million, or 36 cents, a year earlier, the Fort Worth, Texas-based company said Monday in a statement. The average of 14 analyst estimates was 35 cents a share, according to data compiled by Bloomberg. Results for the quarter included $6 million in inventory and land option charges, according to the statement.

D.R. Horton was one of the first builders to focus on boosting its sales count over increasing profit margins, offering incentives such as price cuts, free appliances and reduced closing costs. Orders in the first quarter rose 35 percent in volume to 7,370 homes and 40 percent in value to $2.1 billion.

D.R. Horton’s “continued solid execution, highlighted by above-average order growth and consistently solid operating margins,” led Wells Fargo & Co. to maintain an outperform rating, the equivalent of a buy, Adam Rudiger, a Boston-based analyst with the bank, said Monday in a note to investors.

The shares climbed 5.5 percent to $24.38, the biggest gain since Oct. 17 and the most among the 11 companies in the Standard & Poor’s Supercomposite Homebuilding Index, which rose 2.2 percent.

NVR Falls

The only company in the index that declined, Reston, Virginia-based NVR Inc., fell 2.7 percent after reporting fourth-quarter earnings that were below analysts’ estimates and orders that increased only 3 percent.

Builders broke ground on single-family homes at an annual pace of 728,000 last month, the most in seven years while remaining more than 30 percent below the U.S. average since 1995, according to Commerce Department data. The department reports December new-home sales tomorrow.

D.R. Horton’s homebuilding revenue rose to $2.3 billion in the quarter from $1.6 billion a year earlier. The gross profit margin for home sales fell to 19.8 percent from 22.3 percent a year earlier, according to Drew Reading, a Bloomberg Intelligence analyst. The average selling price was about $281,000 compared with $263,500 a year earlier, Reading said.

Margins were in line with expectations, according to Rudiger of Wells Fargo.

Volatile Stocks

D.R. Horton’s orders for the quarter and January commentary were both positive, “particularly in light of how volatile homebuilding stocks have been as of late,” Rudiger said in his note. “However, we caution investors from getting too excited as the company noted the same January trend last year, and the spring selling season largely turned out to be a disappointment.”

D.R. Horton sells houses ranging from entry-level Express models to its costlier line of Emerald homes. The company does business in 27 states.

Shares of other builders, including Lennar Corp. and KB Home, fell this month after the companies announced their margins will narrow on rising costs and limited pricing power.