D.R. Horton Inc (DHI.N) almost tripled its quarterly profit by selling more homes at higher prices and forecast an even better second half of the year as a recovering economy encourages more Americans to buy houses.
Shares of the largest U.S. homebuilder rose as much as 8 percent after its second-quarter earnings raced past Wall Street estimates and the company said the spring selling season was off to a good start.
"The first half of fiscal year 2013 was nothing short of phenomenal," Chief Executive Donald Tomnitz said on a post-earnings conference call. "We expect the second half to be even better."
The U.S. economy expanded at an annual rate of 2.5 percent in the first three months of 2013 after growth nearly stalled at 0.4 percent in the previous quarter, the Commerce Department said on Friday.
Home construction added to U.S. economic growth last year for the first time since 2005, and ground-breaking to build new homes in the United States rose 7 percent in March to the highest level since June 2008.
"D.R. Horton's strong results should abate a lot of fears about slowing housing trends that a lot of people were expecting coming out of the first quarter," Williams Financial Group analyst David Williams said.
Record-low interest rates and rising rents are prompting more Americans to buy homes, leading to a shortage of new houses and allowing builders to command higher prices. U.S. home prices in January posted their biggest year-on-year gain in six-and-a-half years.
With an inventory of nearly 16,000 new homes ready for sale, D.R. Horton is better positioned than many of its competitors to meet this rising demand, analysts said.
The recovery is being felt further up the supply chain. Weyerhaeuser Co (WY.N), a century-old company that makes wood products used in construction, more than tripled first-quarter profit due mainly to housing demand.
D.R. Horton, which sells homes priced between $100,000 and $600,000, said its average selling price rose 14 percent in the second quarter ended March.
The company's orders rose 34 percent to 7,879 homes, with a total value of $2 billion in the quarter, up from $1.3 billion a year earlier. Orders are a key indicator for builders, who do not recognize their value until they close on a home.
Net income rose to $111.0 million, or 32 cents per share, in the second quarter from $40.6 million, or 13 cents per share, a year earlier. Revenue rose 49 percent to $1.39 billion.
Analysts on average expected a profit of 19 cents per share and revenue of $1.26 billion, according to Thomson Reuters I/B/E/S.
D.R. Horton has steered clear of entering the apartment rental business, a market that has attracted peers such as Lennar Corp (LEN.N) and Toll Brothers Inc (TOL.N) on demand from potential first-time buyers who are unable to secure mortgages in a tight credit market.
"D.R. Horton's management team is very focused and they tend to do what they know," Williams said. "Today, they're concentrating on their core business."
D.R. Horton's shares have risen 52 percent in the last 12 months, slightly lagging the Dow Jones U.S. Home Construction index .DJUSHB. The stock was up 7 percent at $26.15 on Friday afternoon on the New York Stock Exchange.
Shares of Lennar were up 1 percent, while those of Toll Brothers and No. 2 U.S. homebuilder PulteGroup (PHM.N) -- which reported a better-than-expected quarterly profit on Thursday-- were up 2 percent.
Shares of Weyerhaeuser rose to a year-high of $32.
(Additional reporting by Garima Goel in Bangalore; Editing by Roshni Menon)