Entry-level homes help D.R. Horton boost sales and profit

Fort Worth-based D.R. Horton, the nation’s largest home builder, reported fiscal second-quarter earnings that beat analysts’ estimates as it increased sales amid a tight inventory of properties on the market.

Net income for the three months ending March 31 climbed to $195.1 million, or 52 cents a share, from $147.9 million, or 40 cents, a year earlier, the company said Thursday. The average estimate of 16 analysts was earnings of 46 cents a share, according to data compiled by Bloomberg. D.R. Horton raised its full-year pretax profit margin estimate.

D.R. Horton has boosted sales with the help of its entry-level Express Brand, which appeals to buyers facing a tight market of existing homes listed for sale. There were 1.98 million houses on the market at the end of March, down 1.5 percent from a year earlier, the National Association of Realtors reported Wednesday.

“Horton’s early push into the entry-level has given them an early-mover advantage relative to peers which, until more recently, have focused almost exclusively on the move-up segment,” Bloomberg Intelligence analyst Drew Reading wrote in an email before the company announced its results. “Their view, which has been validated, was that a lack of inventory at affordable price points was holding back demand.”

Home building revenue rose 16 percent to $2.7 billion, D.R. Horton said. Home sales completed in the quarter climbed 12 percent to 9,262, and orders increased 10 percent by volume. D.R. Horton forecasts full-year pretax profit margin between 10.7 and 11.2 percent compared with prior guidance of 10.5 to 11 percent.

“Solid performance in our three core brands is enabling us to capitalize on market opportunities and expand our industry-leading market share,” Chairman Donald Horton said in the statement. “We are well-positioned for the second half of fiscal 2016.”

This story was originally published April 21, 2016 at 11:54 AM with the headline "Entry-level homes help D.R. Horton boost sales and profit."