Demand for new US homes boosts DR Horton DR Horton shares surged more than 10 per cent after the largest US homebuilder by units reported its most profitable first quarter since 2007, as demand for new houses more than doubled earnings. Net income rose to $66.3m, or 20 cents a share, in the three months to December 31, from $27.7m, or 9 cents, in the same period a year ago. This beat consensus forecasts of 14 cents a share. Pre-tax income rose 270 per cent to $107.9m from the same quarter a year ago, while homebuilding revenue increased 39 per cent to $1.23bn. Shares in the Fort Worth, Texas-based company, which have risen 63 per cent in the past 12 months, jumped 10.5 per cent to $23.54 in mid-morning trading on Tuesday. Record low mortgage interest rates and dwindling inventories of existing and new homes for sale have led to rising property prices, giving confidence to homebuyers. Homebuilders in turn have boosted construction in order to meet this renewed demand. We experienced substantial increases in the number of homes sold, closed and in backlog compared to the year-ago quarter. At the same time, our average sales price has increased due to pricing power, geographic mix and larger average home size," said Donald Horton, chairman. The homebuilder has used its size advantage to manage costs, increase market share and boost land acquisition ahead of its smaller rivals. We significantly increased our investments in homes under construction, finished lots, land and land development to capture this increasing demand. DR Horton is the best positioned it has been in its 35-year history," Mr Horton added. Cash and cash equivalents fell to $546m from about $1bn quarter on quarter. Closings increased 26 per cent from a year earlier and new orders jumped 39 per cent to 5,259 homes. The backlog of houses under contract, an indication of future sales, rose 62 per cent, while the value of these properties surged 80 per cent to $1.76bn. US builders sold 367,000 new homes in 2012, the most since 2009 and the first annual gain in seven years, the Commerce Department said last week. This improvement in demand allowed DR Horton to increase its average home price by 10 per cent to $236,100 in the quarter from the previous year. Gross margin stood at 18.8 per cent, up 200 basis points from a year ago. Most noteworthy in our view is DR Horton's reinvestment in inventory . . . We interpret the aggressive capital deployment as a sign of management's confidence in the recovery," said Adam Rudiger, analyst at Wells Fargo Securities. "DR Horton's willingness and ability to . . . build inventory heading into the all-important spring selling season positions the company well to take share from those less willing to build speculative homes," he added.