D.R. Horton, Inc. (NYSE:DHI) on Tuesday reported net income for the first fiscal quarter ended December 31of $206.9 million, or $0.55 per diluted share, up 31% from $157.7 million, or $0.42 per diluted share, in the same quarter of fiscal 2016. Analysts were expecting earnings of $0.48 per share. Shares of DHI closed up 6.6% Tuesday after igniting a sector-wide rally that sent shares of Beazer Homes (NYSE:BZH) up 8.8%, Hovnanian Enterprises (NYSE:HOV) up 7.5%, Lennar (NYSE:LEN) up nearly 6%, PulteGroup (NYSE:PHM) up 5.9% and CalAtlantic (NYSE: CAA) up more than 5%.
Net sales orders for the quarter rose 15% to 9,241 homes and were up 17% in value to $2.8 billion compared to 8,064 homes and $2.4 billion in the prior year quarter. The cancellation rate (cancelled sales orders divided by gross sales orders) for the first quarter of fiscal 2017 was 22% compared to 23% in the same quarter of fiscal 2016. Backlog at quarter’s end increased 6% to 11,312 homes, up 7% in value to $3.4 billion, compared to 10,665 homes and $3.2 billion at December 31, 2015.
Home building revenue for the first quarter of fiscal 2017 increased 20% to $2.8 billion from $2.4 billion in the same quarter of fiscal 2016. Homes closed in the quarter increased 17% to 9,404 homes compared to 8,061 homes in the prior year quarter.
Pre-tax profit margin for the first quarter of fiscal 2017 improved 100 basis points to 11.0% from 10.0% in the same quarter of fiscal 2016. The improvement in pre-tax profit margin was driven primarily by a 70 basis point decrease in home building SG&A expense as a percentage of revenues.
Home sales gross margin in the first quarter of fiscal 2017 was 19.8%, compared to 19.9% in the prior year quarter and 20.5% in the fourth quarter of fiscal 2016. Gross margin decreased from the fourth quarter primarily due to higher warranty and litigation costs as a percentage of home building revenues. In the current housing market, the company said it continues to expect its average home sales gross margin to be around 20%, with quarterly fluctuations that may range from 19% to 21% due to product and geographic mix and the relative impact of warranty, litigation and interest costs. Home building SG&A expense as a percentage of revenue in the first quarter of fiscal 2017 was 9.5% compared to 10.2% in the prior year quarter.
The Company ended the quarter with $1.1 billion of home building unrestricted cash and home building debt to total capital of 28.6%.
“These results reflect the strength of our experienced operational teams, diverse product offerings through our family of brands and good market conditions across our broad national footprint,” said Donald R. Horton, chairman and founder. We remain focused on growing our revenues and pre-tax profits at a double-digit annual pace, while continuing to generate positive annual operating cash flows and improved returns. With 24,500 homes in inventory at the end of December and a robust supply of lots, we are well-positioned for the upcoming spring selling season and the remainder of fiscal 2017.”
The company reaffirmed guidance including a consolidated pre-tax profit margin of 11.2% to 11.5%, consolidated revenues of $13.4 billion to $13.8 billion, homes closed between 43,500 homes and 45,500 homes and cash flow from operations in the range of $300 million to $500 million for the full sical year. It also declared a quarterly cash dividend of $0.10 per common share.
The company has also announced it will be moving its corporate headquarters to the Arlington, Tx. neighborhood that is home to both the Dallas Cowboys and the Texas Rangers.
