Rising Home Price Helps D.R. Horton Inc. (NYSE:DHI)
D.R. Horton Inc. (NYSE:DHI), the largest builder in the US by revenue, has announced that their earnings had jumped by 86% in the fiscal first quarter. This was mainly because the company was able to deliver more housing and raise prices at the same time.
Net income for the company reached $123.3 million or 36 cents a share during the first quarter ended December 31, 2013, as compared to revenue of $66.3 million at 20 cents a share reported a year ago. It compares well with expectations placed on the stock by analysts who projected a 30 cent average.
Chairman of the company Donald R. Horton said, “Housing market conditions continue to improve across most of our operating markets and our weekly sales pace has accelerated in January. We are well-positioned to capture demand in the spring selling season.”
The company’s shares rose by as much as 7.5% to reach $22.50 per share. The company was in troubled waters as it lost 3.8% in the last 12 months on a broader metric around 8.1% decline.
D.R. Horton has traditionally built homes for first time home owners but it is now changing that historical trend to target buyers who can in fact pay higher. It is also using the size of the company to help reduce their costs and increase the profit margins.
The average selling price for homes also rose up by 10% to reach $275600, the property values for contract properties also were raised to $2.1 billion, a rise of 20%.
Wider profit margins
The gross margin on home sales rose by 3.5% to 22.3% as announced by the company. Pretax profit also rose to 11.4% from 2.9%. The recovery for the real estate industry has generally slowed down after a massive slump in recent times. Despite 2013 being a good year for the industry, it ended badly as sales dropped drastically, however a turnaround in fortunes seems near for the entire industry and more so for D.R. Horton