Homebuilder D.R. Horton posts best order growth in over a year

(Reuters) - D.R. Horton Inc DHI.N, the largest U.S. homebuilder, reported its highest growth in orders in more than a year, underscoring the strength in the housing market.

A house built by the D.R. Horton company is seen for sale in Arvada, Colorado January 24, 2017. REUTERS/Rick Wilking

The company’s shares rose as much as 5.88 percent, their biggest intraday percentage jump since Nov. 10, 2015.

D.R. Horton and rivals also gained after a report showed that U.S. home resales fell more than expected in December as the supply of houses on the market dropped to levels last seen in 1999.

Orders, an indicator of future revenue for homebuilders, rose 14.6 percent to 9,241 homes in the first quarter ended Dec. 31, D.R. Horton said on Tuesday. Orders rose across the company’s six operating regions.

The company said it was seeing good sales trend in January very early into spring.

The average selling price for the quarter was $297,000, up 2 percent from a year earlier, the company said.

D.R. Horton, which mainly sells single-family homes, said it sold 9,404 homes in the first quarter, up from 8,061 a year earlier.

“This was an exceptionally strong quarter and speaks to the company’s ability to deliver on its operational and financial targets,” RBC Capital Markets analyst Robert Wetenhall wrote in a note.

D.R. Horton, which caters to people buying their first or second homes, backed its fiscal 2017 forecast of consolidated revenue of $13.4 billion to $13.8 billion.

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The company’s results come in the backdrop of rising mortgage rates in the United States.

Mortgage rates have risen in the wake of Donald Trump’s surprising victory in the Nov. 8 presidential election and are expected to climb further with the Federal Reserve indicating three rate hikes this year.

The Trump administration’s decision to suspend a plan to cut mortgage insurance premiums on federally insured home loans may also weigh on homebuilders.

The cut by the Federal Housing Administration was estimated to help eligible homeowners - often first-time home buyers and those on low incomes - save an average of $500 a year.

Gross margin was 19.8 percent in the latest quarter, compared with 19.9 percent a year earlier, D.R. Horton said.

The homebuilder said it expected average home sales gross margin to be around 20 percent in the current housing market.

U.S. homebuilders had cut their gross margin forecasts last year due to higher land and labor costs.

Fort Worth, Texas-based D.R. Horton’s net income jumped to $206.9 million, or 55 cents per share, in the first quarter, from $157.7 million, or 42 cents per share, a year earlier.

Analysts on average had expected a profit of 47 cents per share, according to Thomson Reuters I/B/E/S.

Home sales revenue rose to $2.80 billion from $2.34 billion.

Reporting by Arunima Banerjee in Bengaluru; Editing by Sriraj Kalluvila