Wall Street expects a year-over-year decline in earnings on lower revenues when D.R. Horton (DHI) reports results for the quarter ended June 2025. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on July 22, might help the stock move higher if these key numbers are better than expectations. On ...

AUSTIN, TEXAS - APRIL 17: Houses undergo construction in a neighborhood on April 17, 2025 in Austin, ... More Texas. Housing starts dropped 11.4% in March according to recent Census Bureau data. D.R. Horton has further indicated a slow start after the company missed earnings expectations earlier today. (Photo by Brandon Bell/Getty Images)Getty ImagesD.R. Horton (NYSE: DHI), a U.S.-based home construction firm, has seen a 12% increase over the past month, outpacing the S&P 500’s 4% rise. Although the company ...

Company Performance - D.R. Horton (DHI) closed at $131.90, reflecting a -2.74% change from the previous day, underperforming the S&P 500's gain of 0.83% [1] - Over the past month, D.R. Horton shares increased by 9.78%, outperforming the Construction sector's gain of 7.94% and the S&P 500's gain of 4.99% [1] Upcoming Financial Results - D.R. Horton is set to announce its earnings on July 22, 2025, with an expected EPS of $2.93, indicating a 28.54% decline from the same quarter last year [2] - The consensus estimate for revenue is $8.82 billion, down 11.48% from the prior-year quarter [2] Full Year Projections - For the full year, earnings are projected at $11.47 per share and revenue at $34.1 billion, reflecting declines of -20.01% and -7.34% respectively from the previous year [3] - Recent changes in analyst estimates are crucial as they indicate near-term business trends, with positive revisions suggesting analyst optimism [3] Valuation Metrics - D.R. Horton is currently trading at a Forward P/E ratio of 11.83, which is higher than the industry average Forward P/E of 10.68 [6] - The company has a PEG ratio of 4.24, compared to the industry average PEG ratio of 2.27 [7] Industry Context - The Building Products - Home Builders industry, part of the Construction sector, holds a Zacks Industry Rank of 210, placing it in the bottom 15% of over 250 industries [8] - The Zacks Industry Rank measures the strength of industry groups based on the average Zacks Rank of individual stocks, with top-rated industries outperforming the bottom half by a factor of 2 to 1 [8]

Group 1 - The company aims to invest in firms with strong qualitative attributes, purchasing them at attractive prices based on fundamentals, and holding them indefinitely [1] - The investment strategy focuses on maintaining a concentrated portfolio to avoid underperformers while maximizing exposure to high-potential winners [1] - The company plans to publish articles on selected companies approximately three times a week, including extensive quarterly follow-ups and constant updates [1] Group 2 - The company may rate high-quality firms as 'Hold' if their growth opportunities do not meet the required threshold or if the downside risk is deemed too high [1]

The analysis is provided exclusively for informational purposes and should not be considered professional investment advice. Before investing, please conduct personal in-depth research and utmost due diligence, as there are many risks associated with the trade, including capital loss. Analyst's Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expre ...

Group 1 - The article discusses the intermediate to long-term prospects for D.R. Horton (DHI), indicating a positive outlook while suggesting potential short-term challenges [1] - The author emphasizes an opportunistic and flexible investment approach, focusing on fundamental analysis and valuation-driven strategies [1] - The investment strategy includes a diverse range of assets such as individual stocks, options, bonds, ETFs, and mutual funds, aiming to capitalize on various opportunities [1] Group 2 - The author has a beneficial long position in DHI shares, indicating confidence in the company's performance [2] - The article is a personal opinion piece, with no external compensation influencing the views expressed [2]

Group 1: Company Overview - D.R. Horton, Inc. (DHI) is experiencing a slowdown in the housing market and has recently lowered its guidance for the year [1] Group 2: Industry Context - The housing market is currently facing challenges, impacting major homebuilders like D.R. Horton [1]

Financial Performance - Consolidated revenues decreased 9% to $15.3 billion compared to $16.8 billion for the six months ended March 31, 2025[119]. - Net income attributable to D.R. Horton decreased 22% to $1.7 billion compared to $2.1 billion[137]. - Total revenues for the six months ended March 31, 2025, were $14,253.8 million, with a net income of $1,488.2 million[264]. - Pre-tax income for consolidated operations for the three months ended March 31, 2025, was $1.1 billion, down from $1.5 billion in the same period of 2024, a decrease of 26.7%[215]. Home Sales and Orders - Homes closed decreased 15% to 19,276 homes, and the average closing price of those homes decreased 1% to $372,500[128]. - Net sales orders decreased 15% to 22,437 homes, and the value of net sales orders decreased 17% to $8.4 billion[128]. - The cancellation rate for sales orders was 17% for the six months ended March 31, 2025, consistent with the prior year[144]. - Homes closed decreased by 15% to 19,276 in Q1 2025, compared to 22,548 in Q1 2024, with total revenue from home sales at $7.2 billion[154]. Margins and Profitability - Home sales gross margin decreased to 21.8% compared to 23.2%[128]. - Homebuilding pre-tax income decreased 21% to $1.9 billion, representing 13.6% of homebuilding revenues compared to 15.6%[137]. - Gross profit from home sales decreased to $1.6 billion in Q1 2025, representing a gross margin of 21.8%, down from 23.2% in Q1 2024[159]. Rental Segment Performance - Rental revenues decreased 36% to $236.6 million compared to $371.3 million[132]. - Pre-tax income for the rental segment was $22.8 million for the three months ended March 31, 2025, a decline from $33.3 million in the same period last year[195]. - The gross profit margin for rental operations improved to 22.6% for the three months ended March 31, 2025, compared to 18.4% in the prior year[193]. Inventory and Land Management - Total homebuilding inventories as of March 31, 2025, amounted to $20,911.7 million, compared to $20,031.0 million as of September 30, 2024[182]. - The company actively manages its inventory of owned land and lots and homes under construction relative to demand in each market[181]. - The company controlled approximately 613,100 lots as of March 31, 2025, with 36,900 homes in inventory, compared to 632,900 lots and 37,400 homes in inventory as of September 30, 2024[184][188]. Financial Services - Total revenues from financial services operations decreased by 6% to $212.9 million for the three months ended March 31, 2025, compared to $225.6 million in the prior year[211]. - DHI Mortgage originated 15,592 first-lien loans for D.R. Horton homebuyers in the three months ended March 31, 2025, a decrease of 14% from 18,066 loans in the same period of 2024[206]. Debt and Capital Management - The company's debt to total capital ratio increased to 21.1% as of March 31, 2025, compared to 18.9% at September 30, 2024[221]. - The company plans to maintain a long-term debt to total capital ratio around 20%[221]. - As of March 31, 2025, the company had outstanding notes payable totaling $6.6 billion, with $2.1 billion due within 12 months[220]. Shareholder Returns - The company declared cash dividends totaling $254.0 million for the six months ended March 31, 2025, with a quarterly dividend of $0.40 per share approved for April 2025[256]. - The company repurchased 16.5 million shares at a total cost of $2.4 billion during the six months ended March 31, 2025[229].

Financial Data and Key Metrics Changes - Earnings for the second quarter were $2.58 per diluted share, down from $3.52 per share in the prior year quarter [13] - Net income for the quarter was $810 million on consolidated revenues of $7.7 billion, with a pre-tax profit margin of 13.8% [7][13] - Home sales revenues decreased 15% to $7.2 billion, with 19,276 homes closed compared to 22,548 homes in the prior year quarter [13] - The average closing price for the quarter was $372,500, down 1% year-over-year [13] Business Line Data and Key Metrics Changes - Net sales orders decreased 15% to 22,437 homes, with order value down 17% to $8.4 billion [14] - The gross profit margin on home sales revenue was 21.8%, down 90 basis points sequentially due to higher incentive costs [16] - Homebuilding SG&A expenses increased by 4% year-over-year, with SG&A as a percentage of revenues at 8.9%, up 170 basis points from the prior year [19] Market Data and Key Metrics Changes - The cancellation rate for the quarter was 16%, down from 18% sequentially but up from 15% in the prior year quarter [14] - The average number of active selling communities increased by 5% sequentially and 10% year-over-year [14] - The company started 20,000 homes in the March quarter and ended with 36,900 homes in inventory, with 23,500 unsold homes [21] Company Strategy and Development Direction - The company remains focused on improving capital efficiency to generate substantial operating cash flow and deliver returns to shareholders [8] - The management emphasized balancing pace and price to maximize returns in response to market conditions [10][46] - The company plans to adjust product offerings, sales incentives, and inventory based on local market demand [12] Management's Comments on Operating Environment and Future Outlook - Management noted that the spring selling season started slower than expected due to affordability constraints and declining consumer confidence [9] - The company expects consolidated revenues for the third quarter to be in the range of $8.4 billion to $8.9 billion, with homes closed expected to be between 22,000 and 22,500 [37] - Management acknowledged significant current volatility and uncertainty in the economy, committing to adjust operations and capital allocation accordingly [40] Other Important Information - The company plans to repurchase approximately $4 billion of common stock in fiscal 2025, more than double the amount purchased in fiscal 2024 [38] - The rental operations generated $23 million of pre-tax income on $237 million of revenues [25] - Forestar, the company's majority-owned residential lot development company, reported revenues of $351 million for the second quarter [29] Q&A Session Summary Question: Changes in Management Approach - Management acknowledged a shift in focus from sheer size to consistent operating cash flow and returns to shareholders [44][46] Question: SG&A Rate Increase - Management confirmed that while SG&A costs have increased, they remain focused on efficiency and expect SG&A to be lower over time as volumes increase [51][55] Question: Third Quarter Gross Margin Expectations - Management indicated that if incentives remain flat, gross margins could reach the higher end of the guidance range [62] Question: Tariff Impact on Costs - Management expressed confidence in their supply chain's ability to manage potential tariff impacts, emphasizing their strong market position [65][66] Question: Spec Count and Future Growth - Management noted that while starts are currently lower, they expect to accelerate starts in response to market demand [73] Question: Performance in Different Markets - Management highlighted strong demand in supply-constrained markets and noted that first-time homebuyers remain a significant portion of their customer base [82][84] Question: Land Costs and Future Expectations - Management reported that land costs are up 10% year-over-year and do not expect significant relief in land prices [140]

Financial Performance - Net income attributable to D.R. Horton decreased 31% to $810.4 million, or $2.58 per diluted share, compared to $1.2 billion, or $3.52 per diluted share, in the same quarter of fiscal 2024[2]. - Consolidated revenues for the second quarter decreased 15% to $7.7 billion from $9.1 billion in the same quarter of fiscal 2024[3]. - Homebuilding revenue decreased 15% to $7.2 billion, with homes closed decreasing 15% to 19,276 homes compared to the same quarter of fiscal 2024[10]. - Net sales orders decreased 15% to 22,437 homes, with an order value of $8.4 billion, compared to 26,456 homes and $10.1 billion in the same quarter of fiscal 2024[14]. - Homebuilding pre-tax income decreased 31% to $935.0 million, with a pre-tax profit margin of 13.0% compared to 16.0% in the same quarter of fiscal 2024[11]. - Revenues for the three months ended March 31, 2025, were $7,734.0 million, a decrease of 15.1% compared to $9,107.2 million for the same period in 2024[35]. - Net income attributable to D.R. Horton, Inc. for the six months ended March 31, 2025, was $1,655.3 million, down 21.9% from $2,119.5 million for the same period in 2024[35]. Assets and Liabilities - Total assets as of March 31, 2025, were $35,690.0 million, a slight decrease from $36,104.3 million as of September 30, 2024[33]. - The company’s total liabilities increased to $10,831.3 million as of March 31, 2025, from $10,279.9 million as of September 30, 2024, indicating a rise of 5.4%[33]. - The total liabilities as of March 31, 2025, were $10,831.3 million, with notes payable accounting for $6,518.4 million[39]. - The company reported a net cash used in financing activities of $2,141.9 million for the six months ended March 31, 2025, compared to $270.6 million for the same period in 2024[37]. Cash and Liquidity - Cash and cash equivalents decreased to $2,471.4 million as of March 31, 2025, from $4,516.4 million as of September 30, 2024, representing a decline of 45.4%[33]. - Cash provided by operating activities was $876.0 million, while cash used in rental activities was $(381.6) million[42]. - The company experienced a decrease in cash and cash equivalents from $4,516.4 million as of September 30, 2024, to $2,471.4 million as of March 31, 2025[39]. Shareholder Returns - D.R. Horton repurchased 9.7 million shares for $1.3 billion during the second quarter, totaling 16.5 million shares repurchased for $2.4 billion in the first six months of fiscal 2025[23]. - The company declared a quarterly cash dividend of $0.40 per share, payable on May 9, 2025[22]. - D.R. Horton maintained a disciplined approach to capital allocation, consistently returning capital to shareholders through share repurchases and dividends[29]. Future Outlook - For fiscal 2025, D.R. Horton expects consolidated revenues in the range of $33.3 billion to $34.8 billion and homes closed between 85,000 to 87,000[26]. - The company is focused on maximizing returns in each of its communities with affordable product offerings and flexible lot supply[29]. Inventory and Sales - Total inventory increased to $26,482.4 million as of March 31, 2025, compared to $24,903.2 million as of September 30, 2024, reflecting a growth of 6.3%[33]. - Home sales revenue for the three months ended March 31, 2025, was $7,180.9 million, contributing to a consolidated revenue of $7,734.0 million[42]. - The cost of sales for home sales was $5,614.7 million, resulting in a gross profit of $1,566.2 million for the same period[42]. - Home sales revenue for the three months ended March 31, 2024, was $8,466.7 million, contributing to a consolidated revenue of $9,107.2 million[45]. - For the six months ended March 31, 2024, home sales revenue reached $15,743.1 million, with consolidated revenue totaling $16,833.1 million[45]. Orders and Backlog - The company reported net sales orders of 22,437 homes valued at $8,358.6 million for the three months ended March 31, 2025, compared to 26,456 homes valued at $10,063.2 million for the same period in 2024[48]. - As of March 31, 2025, the sales order backlog consisted of 14,164 homes valued at $5,476.7 million, down from 17,873 homes valued at $7,039.3 million as of March 31, 2024[52]. - Homes closed during the three months ended March 31, 2025, totaled 19,276, with a value of $7,180.9 million, while 22,548 homes were closed in the same period of 2024, valued at $8,466.7 million[50]. Operational Metrics - The company's debt to total capital ratio was 21.1% as of March 31, 2025, with total liquidity of $5.8 billion[5]. - The company controlled a total of 613,100 lots as of March 31, 2025, compared to 632,900 lots as of September 30, 2024[54]. - Homes in inventory as of March 31, 2025, totaled 36,900, a slight decrease from 37,400 homes as of September 30, 2024[58].