D.R. Horton Inc's (DHI.N) quarterly profit edged past estimates on Thursday but concerns about the resilience of a recovery in the U.S. housing market weighed on the company's shares.
The largest U.S. homebuilder's shares were down 2.8 percent in afternoon trading, dragging peers including Lennar Corp (LEN.N) and PulteGroup Inc (PHM.N) lower.
Several analysts estimated that the number of homes sold by D.R. Horton could potentially slow in the second half of the year.
"Shares are trading modestly lower on decelerating growth in the back half as the increased 2017 guidance mainly reflects fiscal 2Q outperformance," Keefe, Bruyette & Woods analyst Jade Rahmani wrote in a client note.
The recovery in the U.S. homebuilding sector has been clouded this year by stagnant wages and higher interest rates. While annual wage growth has remained firmly below 3 percent, mortgage rates are expected to climb.
Homebuilders have also been struggling with limited supply and a shortage of labor.
A string of weak housing data in recent weeks has also weighed on the sector. Single-family homebuilding, which accounts for the largest share of the residential housing market, fell 6.2 percent in March.
The company's second-quarter results, however, were largely positive, heading into the crucial spring selling season.
Orders, a key indicator of future revenue for homebuilders, rose 13.8 percent to 13,991 homes in the second quarter ended March 31, D.R. Horton said.
The company sold 10,685 homes in the quarter, up from 9,262 in the year-earlier period.
Sales of new U.S. single-family homes - the kind D.R. Horton specializes in - touched a seven-month high in February.
The Fort Worth, Texas-based company raised its 2017 revenue forecast to $13.6 billion-$14.0 billion from $13.4 billion-$13.8 billion.
D.R. Horton said it expects to sell 44,500-46,000 homes, compared with its previous forecast of 43,500-45,500.
CFRA analyst Ken Leon played down the stock movement.
"It (stock movement) is an overreaction to extrapolating a slower growth in the second half, but that may not be the case."
Net income rose to $229.2 million, or 60 cents per share, in the quarter, from $195.1 million, or 52 cents per share, in the year-ago quarter.
Home sales rose 17.6 percent to $3.16 billion.
Analysts expected profit of 59 cents per share, according to Thomson Reuters I/B/E/S.
(Reporting by Arunima Banerjee in Bengaluru; Edited by Martina D'Couto and Saumyadeb Chakrabarty)