D.R. Horton Inc.'s quarterly profit more than doubled as it managed to sell more homes at higher prices, leading the No. 1 U.S. homebuilder to forecast a good spring selling season.
Horton's shares rallied on the news. In the final minutes of trading on the New York Stock Exchange, the shares were up 11.7 percent at $23.81, after trading as high as $24.03. The gain extended the stock's nearly 50 percent rise over the past 12 months.
Low mortgage rates, rising rents and fewer foreclosures have spurred demand in the U.S. housing market in recent quarters.
D.R. Horton said it was in a stronger position to meet rising demand compared with competitors, who may not have as many spec homes -- built without an existing sale contract -- in their inventory.
New home inventory in the United States has been at among its lowest levels in five or six years, the company said.
The limited supply, combined with a preference for new homes over existing ones, have added to D.R. Horton's pricing power.
Good quality foreclosed homes have already been sold, Williams Financial Group analyst David Williams said, so first-time buyers have to look to new homes that offer better asset value than a foreclosed home.
"It's not just that (D.R. Horton) is the largest homebuilder, it is also its geographic diversity, and a balance sheet position to take out large pieces of land," Williams said.
New orders in the first quarter rose 39 percent to 5,259 homes, while the value of the company's order backlog jumped 80 percent to $1.76 billion.
Orders are a key indicator for builders who do not recognize revenue until they close on a home.
D.R. Horton's average selling price for new orders increased 15 percent in the quarter to $249,900 per home, compared to a year earlier, the company said on its earnings call.
The median price for a new home in the United States rose by a percent to $248,900 in December.
"We experienced broad improvement in demand in most of our markets this quarter ... (which) was our most profitable first quarter since 2007," said Chairman Donald R. Horton, who founded the company in 1978.
Homebuilding revenue rose 39 percent to $1.22 billion during the first quarter, and was ahead of the $1.1 billion analysts had estimated, according to Thomson Reuters I/B/E/S.
Net income more than doubled to $66.3 million, or 20 cents per share, and was also well above analysts' estimates of 14 cents per share. A year earlier, the company had a profit of $27.7 million, or 9 cents per share.
Smaller rival Lennar Corp also reported a better-than-expected fourth-quarter profit and a sharp jump in new home orders.
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