D.R. Horton Inc's quarterly profit almost tripled as it sold more homes at higher prices, and the No.1 U.S. homebuilder said the spring selling season was off to a strong start, sending its shares up 7 percent before the bell.
Record-low interest rates and rising rents have prompted more Americans to buy homes, leading to a shortage of new houses and allowing builders to command higher prices.
D.R. Horton is in a better position than competitors to meet this demand as it has a large inventory of homes built without a sales contract.
"We are in an excellent position to continue to meet increased sales demand and aggregate market share with 15,800 homes in inventory," Chairman Donald R. Horton said in a statement on Friday.
The company, which sells homes priced between $100,000 and $600,000, said its average selling price rose 14 percent in the second quarter ended March.
"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.
Ground-breaking to build new homes rose 7 percent in March to their highest level since June 2008.
"There's a clear runway ahead of (D.R. Horton) to push sales," Williams said.
Orders rose 34 percent to 7,879 homes, with a total value of $2 billion, up from $1.3 billion in the same quarter last year. 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.
PulteGroup Inc , the No. 2 U.S. homebuilder, also reported a better-than-expected quarterly profit on Thursday as its strategy of selling fewer homes at higher prices paid off.
D.R. Horton's shares have risen 52 percent in the last 12 months, slightly lagging the Dow Jones U.S. Home Construction index . The stock was up 7 percent at $26.15 before the bell on Friday.
Shares of No.3 builder Lennar Corp rose 1 percent, while those of luxury homebuilder Toll Brothers Inc and PulteGroup were up 2 percent.
(Editing by Roshni Menon)