D.R. Horton beats quarterly estimates, warns of weaker margins

By Aatreyee Dasgupta and ⁠Abhinav Parmar

Jan 20 (Reuters) - ⁠U.S. ‍homebuilder D.R. Horton posted first-quarter profit and revenue above Wall Street estimates on Tuesday, but warned that second-quarter home ‍sales gross margin will likely fall sequentially due to higher ​incentives to buyers.

Homebuilders in the U.S. have been leaning on incentives such as mortgage ​rate buydowns, as well as offering smaller and cheaper home options, to lure customers who have delayed home buying due to high inflation.

"We accelerated the use of those ​incentives throughout the quarter and the exiting incentive levels in December are heavily coloring our margin outlook for the second quarter," ​the company said in its post-earnings conference call.

D.R. Horton expects second-quarter home sales gross margin between ‌19% and 19.5%, and revenue between $7.3 billion and $7.8 billion, the midpoint of which is below analysts' average estimate of $7.72 ​billion, according to data compiled by LSEG.

Shares ⁠of the company were down 1.3% in early trading.

Analysts at RBC said gross margin pressure in the second ‌quarter and weak orders add to downside risk for D.R. Horton's stock.

U.S. President Donald Trump earlier this month ordered government-sponsored mortgage finance firms Freddie Mac and ‌Fannie Mae to buy $200 billion in mortgage bonds, in an attempt to drive down ‌borrowing costs.

Trump has also proposed barring institutional investors from buying single-family homes, a move the White House said would ensure more inventory remains available for everyday American ‍families.

"We're pleased that the administration acknowledges housing affordability is an issue," D.R. Horton said.

The Arlington, Texas-based company posted ⁠a profit of $2.03 per share in the first quarter, above estimates of $1.93 per share. Revenue fell to $6.89 billion from $7.61 billion a year ago, but came above analysts' estimate of $6.60 billion.

(Reporting by Aatreyee Dasgupta and Abhinav Parmar in Bengaluru; Editing by Shinjini Ganguli)

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