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].

Core Viewpoint - D.R. Horton, Inc. reported disappointing second-quarter fiscal 2025 results, with earnings and total revenues falling short of expectations and declining year-over-year [1][5]. Financial Performance - Adjusted earnings per share were $2.58, missing the Zacks Consensus Estimate of $2.66 by 3%, and down from $3.52 in the same quarter last year [5]. - Total revenues amounted to $7.73 billion, a 15% decrease year-over-year, and also missed analysts' expectations of $8.09 billion by 4.4% [5]. - The consolidated pre-tax profit margin was 13.8%, down from 16.8% a year ago [6]. Segment Performance - Homebuilding revenues were $7.2 billion, a 15% decline from the prior-year quarter, with home sales at $7.18 billion, down 15.2% year-over-year [7]. - Net sales orders decreased by 15% year-over-year to 22,437 homes, with the value of net orders dropping 17% to $8.4 billion [8]. - Financial Services revenues fell by 5.6% to $212.9 million, while the Rental business generated $144.2 million, down from $301.3 million a year ago [9]. Market Conditions - The housing market remains soft due to declining consumer confidence and affordability concerns, leading to lower net sales orders and weak contributions from rental operations and financial services [2]. - The cancellation rate on gross sales orders was 16%, slightly up from 15% a year ago [8]. Balance Sheet and Liquidity - As of March 31, 2025, D.R. Horton had cash and equivalents totaling $2.52 billion, down from $4.54 billion at the end of fiscal 2024, with total liquidity at $5.8 billion [10][11]. - The company had a debt of $6.5 billion, with a debt-to-total capital ratio of 21.1% [11]. Share Repurchase and Guidance - D.R. Horton repurchased 16.5 million shares for $2.4 billion in the first half of fiscal 2025, with a remaining stock repurchase authorization of $1.2 billion [12]. - The updated fiscal 2025 guidance expects consolidated revenues between $33.3 billion and $34.8 billion, down from a previous range of $36 billion to $37.5 billion [13].

Core Insights - D.R. Horton reported a revenue of $7.73 billion for the quarter ended March 2025, reflecting a year-over-year decline of 15.1% and an EPS of $2.58, down from $3.52 a year ago, missing the Zacks Consensus Estimate of $8.09 billion by 4.40% [1] Financial Performance Metrics - Homes Closed: 19,276, below the analyst average estimate of 20,340 [4] - Net Sales Order - Homes Sold: 22,437, compared to the average estimate of 26,314 [4] - Sales Order Backlog - Homes in Backlog: 14,164, versus the estimated 17,165 [4] - Sales Order Backlog - Value: $5.48 billion, below the average estimate of $6.76 billion [4] - Net Sales Order - Value: $8.36 billion, compared to the estimated $9.94 billion [4] - Revenues from Home Sales - Homebuilding: $7.18 billion, below the average estimate of $7.57 billion, representing a year-over-year change of -15.2% [4] - Revenues from Rental: $236.60 million, below the estimated $286.36 million, reflecting a -36.3% change year-over-year [4] - Revenues from Financial Services: $212.90 million, slightly above the estimated $203.24 million, with a -5.6% change year-over-year [4] - Revenues from Land/Lot Sales and Other - Homebuilding: $22 million, exceeding the estimated $16.37 million, showing a +218.8% change year-over-year [4] - Revenues from Forestar: $351 million, compared to the average estimate of $365.63 million, representing a +5.2% year-over-year change [4] - Revenues from Eliminations and Other: -$269.40 million, better than the estimated -$306.98 million, with a -9.3% year-over-year change [4] Stock Performance - D.R. Horton shares have returned -9.9% over the past month, compared to the Zacks S&P 500 composite's -6.3% change, with a current Zacks Rank of 3 (Hold) indicating potential performance in line with the broader market [3]

Company Performance - D.R. Horton reported quarterly earnings of $2.58 per share, missing the Zacks Consensus Estimate of $2.66 per share, and down from $3.52 per share a year ago, representing an earnings surprise of -3.01% [1] - The company posted revenues of $7.73 billion for the quarter ended March 2025, missing the Zacks Consensus Estimate by 4.40%, and down from $9.11 billion year-over-year [2] - Over the last four quarters, D.R. Horton has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - D.R. Horton shares have declined approximately 15.9% since the beginning of the year, compared to a decline of -10.3% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $3.60 on revenues of $10.14 billion, and for the current fiscal year, it is $12.74 on revenues of $36.46 billion [7] Industry Outlook - The Building Products - Home Builders industry is currently ranked in the bottom 24% of over 250 Zacks industries, indicating potential challenges for stocks in this sector [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

Core Viewpoint - D.R. Horton Inc. is expected to report a decline in earnings and revenues for the second quarter of fiscal 2025, with significant year-over-year decreases anticipated in key metrics [1][2][3]. Revenue Estimates - The Zacks Consensus Estimate for D.R. Horton's earnings per share (EPS) is $2.67, reflecting a 24.2% decline from the previous year's EPS of $3.52 [2]. - Total revenues for the quarter are projected to be between $7.7 billion and $8.2 billion, down from $9.1 billion reported a year ago, indicating an 11.2% year-over-year decline [3][4]. Homebuilding Segment Performance - The Homebuilding segment, which accounted for 94.1% of total revenues in the first quarter, is expected to see a decline in revenues due to decreased home closures amid high mortgage rates and tariff uncertainties [4]. - The company anticipates closing between 20,000 and 20,500 homes in the second quarter, a decrease from 22,548 homes closed in the same quarter last year [4][5]. Margin Expectations - The gross margin for home sales is expected to be between 21.5% and 22%, down from 23.2% in the prior year, reflecting a contraction of approximately 150 basis points [7]. - Selling, general and administrative (SG&A) expenses as a percentage of revenues are projected to rise to 8.4%, compared to 7.2% reported a year ago [8]. Orders and Backlog - Net sales orders for the fiscal second quarter are predicted to decline by 4% year over year to 25,406 units [9]. - The backlog is expected to decrease by 9.2% year over year to 16,230 units, with a projected backlog value of $6.31 billion, indicating a decline of 10.3% [10]. Earnings Prediction - The current model does not predict an earnings beat for D.R. Horton, with an Earnings ESP of -0.54% and a Zacks Rank of 3 (Hold) [11][12].

Core Viewpoint - Analysts expect D.R. Horton (DHI) to report quarterly earnings of $2.69 per share, reflecting a year-over-year decline of 23.6%, with revenues projected at $8.14 billion, down 10.6% from the previous year [1] Earnings Estimates - The consensus EPS estimate has been revised downward by 2.2% over the past 30 days, indicating a collective reassessment by analysts [1][2] Revenue Projections - Analysts project 'Revenues- Home sales- Homebuilding' at $7.57 billion, a decrease of 10.6% year-over-year [4] - 'Revenues- Rental' is expected to reach $286.36 million, down 22.9% year-over-year [4] - 'Revenues- Financial Services' are projected at $203.24 million, indicating a decline of 9.9% year-over-year [4] Geographic Revenue Estimates - 'Geographic Revenues- Homebuilding- Northwest' is expected to be $608.79 million, down 18% year-over-year [5] - 'Geographic Revenues- Homebuilding- North' is projected at $1.01 billion, reflecting an increase of 17.7% year-over-year [5] - 'Geographic Revenues- Homebuilding- Southwest' is estimated at $1.15 billion, down 10.6% from the previous year [6] - 'Geographic Revenues- Homebuilding- South Central' is expected to be $1.62 billion, indicating a decline of 17.5% year-over-year [6] Sales and Orders - Analysts predict 'Homes Closed' to total 20,340, down from 22,548 in the same quarter last year [6] - 'Net sales order - Homes sold' is expected to be 26,314, slightly lower than the previous year's 26,456 [7] - The 'Average selling price - Homes closed' is projected at $371.18 million, compared to $375.50 million in the same quarter last year [7] - The estimated 'Sales order backlog - Homes in backlog' is 17,165, down from 17,873 in the same quarter last year [8] Stock Performance - Over the past month, D.R. Horton shares have returned -5.5%, compared to the Zacks S&P 500 composite's -3.6% [8]

Core Viewpoint - The market anticipates a year-over-year decline in D.R. Horton's earnings due to lower revenues, with a focus on how actual results will compare to estimates [1][3]. Earnings Expectations - D.R. Horton is expected to report quarterly earnings of $2.69 per share, reflecting a year-over-year decrease of 23.6% [3]. - Revenues are projected to be $8.14 billion, down 10.6% from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has been revised 2.16% lower in the last 30 days, indicating a bearish sentiment among analysts regarding the company's earnings prospects [4][10]. - The Most Accurate Estimate is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -1.23% [10][11]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that a positive or negative reading indicates the likely deviation of actual earnings from the consensus estimate, with positive readings being more predictive of earnings beats [6][7]. - A positive Earnings ESP combined with a Zacks Rank of 1, 2, or 3 has shown a nearly 70% success rate in predicting earnings surprises [8]. Historical Performance - In the last reported quarter, D.R. Horton exceeded the expected earnings of $2.40 per share by delivering $2.61, resulting in a surprise of +8.75% [12]. - Over the past four quarters, the company has beaten consensus EPS estimates three times [13]. Conclusion - D.R. Horton does not currently appear to be a strong candidate for an earnings beat, and investors should consider other factors when making investment decisions ahead of the earnings release [16].