By Ananta Agarwal
(Reuters) – D.R. Horton Inc cut its annual home sales forecast and beat Wall Street estimates for quarterly profit on Thursday, as historically low U.S. supply supported demand despite higher mortgage rates, sending its shares to a record high.
The largest U.S. homebuilder by sales volume now expects to deliver between 90,000 and 90,500 homes in fiscal 2024, a higher midpoint than its previous forecast of 89,000 to 91,000 homes.
“Demand from homebuyers during the spring selling season was good despite ongoing affordability challenges,” Chief Executive Paul Romanowski said on a call with analysts after earnings.
The company’s shares rose more than 12% to a record $177.47, also boosted by a new $4 billion buyback authorization.
Existing housing supply, which accounts for a large share of U.S. home sales, has dried up as owners of homes with fixed interest rates below 5% have avoided reselling them in the face of a 30-year fixed mortgage rate hovering around 7%.
Dr. Horton’s company has reduced the prices and size of its homes to address the affordability issue.
However, gross home sales margins were 24% in the third quarter, above the company’s expectations of 23% to 23.5%, as incentive costs, including mortgage rate discounts, declined.
“We have maintained incentives but not pushed them too hard,” Romanowski said, adding that the company expects prices and incentives to remain at a similarly high level in the fourth quarter.
The company also lowered its full-year revenue forecast to between $36.8 billion and $37.2 billion.
The Arlington, Texas-based homebuilder earned $4.10 a share, above analysts’ average estimate of $3.75, according to LSEG data.