By Denny Jacob

D.R. Horton's quarterly results beat Wall Street's estimates, a positive sign for the home builder ahead of the critical spring selling season.

The Arlington, Texas, company's top and bottom lines came in ahead of forecasts despite the closing of fewer home sales in the fiscal first quarter. The use of incentives such as mortgage-rate buydowns helped spur demand. Home builders across the industry have deployed these incentives to nudge would-be buyers off the sidelines as mortgage rates have remained volatile.

While home builders would like to wind down their use of incentives, there may be little reprieve as rates remain elevated and uncertainties linger about some of President Donald Trump's policy proposals. Mortgage rates recently rose above 7% for the first time since mid-2024.

D.R. Horton said Tuesday its gross profit margin on revenue from home sales in the quarter came in at 22.7%, down 90 basis points sequentially given higher incentive costs.

"Our incentive costs are expected to increase further on homes closed over the next few months, so we expect our home sales gross margin to be lower in the second quarter compared to the first quarter," Jessica Hansen, senior vice president of communications, said on a call with analysts Tuesday.

With Trump back in office, companies are waiting to see how his executive orders and other policies will play out. Home builders have been peppered with questions about possible impacts from tariffs and immigration crackdowns.

On the call with analysts, D.R. Horton executives said cost increases wouldn't help housing affordability, which they believe to be a goal of the new administration.

D.R. Horton on Tuesday reported net income of $844.9 million, or $2.61 a share, for the three months ended Dec. 31, down from $947.4 million, or $2.82 a share, a year earlier. Analysts polled by FactSet expected $2.35 a share.

Revenue edged down to $7.61 billion from $7.73 billion, ahead of analyst expectations for $7.01 billion.

Homes closed in the quarter totaled 19,059, down 1.5% compared with 19,340 in the same quarter of fiscal 2024.

Shares of D.R. Horton were roughly flat at $137.47 early Tuesday afternoon, paring back earlier gains.

D.R. Horton maintained its forecast for revenue between $36 billion and $37.5 billion, as well as homes closings in the range of 90,000 to 92,000 in fiscal 2025.

"We need the spring to show up for us and to see the sales," Chief Executive Paul Romanowski said on the call.

Write to Denny Jacob at denny.jacob@wsj.com

(END) Dow Jones Newswires

January 21, 2025 13:13 ET (18:13 GMT)

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