D.R. Horton, Inc. (NYSE: DHI), Fort Worth, Tex., on Tuesday before market open reported a net profit of $192 million ($0.56 per diluted share) for its fiscal first quarter ended Dec. 31, well above analyst estimates of a gain of $0.14 per share. The gain was boosted by a tax benefit of $149.2 million made possible by the net-operating-loss carryback extension passed by Congress last year, but the company still posted pre-tax income of $42.8 million, translating into earnings per share of $0.14.

The gain compares to a loss for the comparable quarter in fiscal 2009 of$62.6 million (-$0.20 per diluted share) and included $1.2 million in impairment charges and write-offs compared to $56.2 million in the first quarter of fiscal 2009.

The results beat estimates across the board. Share of Hornon soared on the news, up 9.2% to $13.01 in morning trading trading on heavy volume.

Home building revenue for the quarter increased 23% to $1.1 billion as homes closed increased 36% to 5,529. Net sales orders rose a robust 45% to 4,037 homes with an aggregate value of $850 million), up from $568 million for the same quarter of fiscal 2009. The cancellation rate improved to 26%, down from 27% sequentially and 38% in the prior year fiscal first quarter.

Backlog of homes under contract at December 31, 2009 was 4,136 homes with a value of $884 million, compared to 4,006 homes worth $889 million the year before.

The financial services segment generated $6.7 million in operating income for the quarter compared to a loss of $2.9 million a year earlier.

Gross margin improved 460 basis points sequentially to 17.1%, and SG&A increased 1% from the year-ago quarter. SG&A as a percentage of homebuilding revenues was 11.6%.

Horton had unrestricted home building cash of $1.9 billion at quarter's end.Net cash provided by operating activities quarter was $220.0 million, including a $113 million federal tax refund received during the quarter. The company has filed for an additional $352 million federal tax refund related to the five-year carry back of its 2009 net operating loss, which is expected to be received during the second fiscal quarter of 2010.

In the first quarter, the Company repurchased a total of $173.2 million principal amount of its outstanding senior notes for a total purchase price of $171.0 million, plus accrued interest. It listed $2.91 billion in notes payable on its balance sheet at quarter's end. Net debt-to-capital for home building improved 730 basis points to 28%.

Horton declared a quarterly cash dividend of $0.0375 per share, payable on February 25 to shareholders of record on February 16.

"Our focus on providing affordable homes positioned us to take advantage of the demand created by the federal tax credit for first-time homebuyers, and we believe that the extension of the tax credit will benefit our spring selling season," said Donald R. Horton, chairman of D.R. Horton, in a statement. "Market conditions in the homebuilding industry are still challenging, characterized by rising foreclosures, high inventory levels of available homes, increasing unemployment, tightening FHA lending standards and weak consumer confidence. However, new home inventory remains low, interest rates are favorable and housing affordability is near record highs.We will continue to focus on providing affordable homes for the first-time buyer, controlling our costs, contracting for new communities with attractively priced finished lots and maintaining our strong balance sheet."

Analysts reacted positively to the earnings report. "Heavy delivery volume (98% backlog turnover) emanating from an aggressive spec building program culminated in the company taking strong advantage of tax credit buyers to boost orders, revenues and margins this [quarter]," wrote Carl Reichardt at Wells Fargo Securities in a note to clients. "DHI's traditional hallmarks--a strong sales effort and stringent field cost control--seem evident here, and if sustainable, the company's profitability ramp could faster than many peers. However, with backlog up just 3% yr/yr on a 45% increase in orders, DHI may need to continue to spec build through the next 2 [fiscal quarters] while relying on the tax credit."

J.P. Morgan's Michael Rehaut titled his research alert "DHI: Orders Solidly Above our Estimate, Core Margins Strongly Above, Charges Minimal." He wrote, "Overall, we believe these results are consistent with our outlook for demand to continue to stabilize if not slowly re-emerge, and supply should continue to become more manageable, which should result in improving orders, margin expansion and lower impairment charges for the builders."

Rehaut reiterated his positive sector stance on the builders and his "neutral" rating on Horton.

David Goldberg at UBS was a bit less positive. "Despite the impressive results, we believe that the company's larger legacy land position will weigh against future performace," he wrote in a research note. "It turn, it is unclear whether it will be able to continue to improve results at the same pace as more land-light peers as conditions stabilize."

Goldberg added, however, that he was planning to review his current earnings estimates and stock price target after the Horton earnings call Tuesday morning.