What happened
D.R. Horton (DHI +0.63%) shareholders beat the market by a wide margin this week. The stock was up 9% through early-Friday trading, according to data provided by S&P Global Market Intelligence, while the S&P 500 declined 0.2% in that time. The homebuilder's shares are now up roughly 20% so far in 2023 compared to an 8% increase in the wider market.
This week's rally was powered by management's comments in a Q1 earnings report describing strength in the wider housing industry.
So what
To be sure, rising interest rates are pressuring sales right now. Revenue was roughly flat in the first-quarter period that ran through late March as home sale volumes fell 1%. D.R. Horton said demand was impacted by inflation and by higher mortgage costs.
NYSE: DHI
Key Data Points
Yet management's comments about the rest of the fiscal year were positive. "The spring selling season is off to an encouraging start," Board Chairman Donald Horton said in a press release. Order volumes jumped 73% higher compared to Q1, management said, with help from modest price cuts. The supply of homes on the market remained low, too, suggesting no impending sales slump over the short term.
Now what
D.R. Horton backed up its positive comments with an optimistic sales outlook. Revenue this year should land between $31.5 billion and $33 billion, or roughly even with 2022's record result. Sales volumes will remain strong, too, with as many as 80,000 home deliveries. D.R. Horton is projecting improving cash flow as well.
This outlook was brighter than many investors had expected, so the stock price jumped as Wall Street reacted to the company's improving growth prospects. The housing market might still soften further, especially if economic growth rates continue slowing. But to date, the company is seeing solid demand trends as it begins the key spring selling season.
