Sign in
HD

HORTON D R INC /DE/ (DHI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 was resilient amid affordability headwinds: revenue $7.61B and diluted EPS $2.61; consolidated pre-tax margin compressed to 14.6% on higher incentive costs, while home sales gross margin fell to 22.7% from 23.6% in Q4 .
  • Management reiterated FY25 revenue ($36.0–$37.5B) and closings (90–92K) guidance, lowered tax rate to ~24.0% (from 24.5%), and raised buyback plan to $2.6–$2.8B (from ~$2.4B), signaling confidence in operating cash flow and capital returns .
  • Q2 guide introduced: revenue $7.7–$8.2B, closings 20.0–20.5K, home sales gross margin 21.5–22.0%, consolidated pre-tax margin 13.7–14.2%, reflecting continued margin pressure from incentives and rate environment .
  • Operational strengths: cycle times improved vs last year, spec strategy enabled 53% sold-and-closed intra-quarter, and lot mix stayed capital-efficient (65% closings on Forestar/third-party lots) .
  • S&P Global consensus estimates were unavailable at time of analysis; results are presented vs prior year/quarter and company guidance (S&P Global consensus unavailable).

What Went Well and What Went Wrong

  • What Went Well

    • Capital return acceleration: repurchased 6.8M shares for $1.06B in Q1 and declared $0.40 dividend; FY25 buyback plan raised to $2.6–$2.8B (“we accelerated some of our planned share repurchases… as our stock price declined”) .
    • Cycle-time and cash-flow execution: consolidated operating cash flow $647M; construction cycle times improved ~3 weeks YoY, positioning for faster inventory turns in 2025 (“we will continue to manage our homes… to achieve targeted closings”) .
    • Lot strategy, affordability mix: 65% of closings on Forestar/third-party lots; continued shift to smaller floor plans and more attached homes to meet demand (“we have continued to start and sell more… smaller floor plans”) .

  • What Went Wrong

    • Margin compression: home sales gross margin fell to 22.7% and is guided lower in Q2 on higher costs of rate buydowns (“we expect our home sales gross margin to be lower in the second quarter”) .
    • Demand/inventory dynamics in select regions: sales/backlog declined YoY; management flagged pockets of inventory build in Florida/Texas as a headwind to pace .
    • Rental segment profitability: rental pre-tax income dropped to $11.9M (vs $31.3M YoY) amid capital market uncertainty and higher rates for buyers (“rental pretax profit margin was impacted…”) .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenues ($USD Billions)$9.97 $10.00 $7.61
Diluted EPS ($USD)$4.10 $3.92 $2.61
Home Sales Gross Margin %24.0% 23.6% 22.7%
Consolidated Pre-tax Margin %18.1% 17.1% 14.6%
Homebuilding SG&A % (of revenue)7.1% 7.6% 8.9%
S&P Global Consensus (Revenue/EPS)N/A (Unavailable)N/A (Unavailable)N/A (Unavailable)
Segment Revenues ($USD Millions)Q3 2024Q4 2024Q1 2025
Home sales$9,231.2 $8,929.4 $7,146.0
Rental property sales$413.7 $704.8 $217.8
Forestar (land/lot and other)$318.4 $551.4 $250.4
Financial services$242.3 $222.0 $182.3
Consolidated Revenues$9,965.7 $10,002.6 $7,613.0
Segment Pre-tax Income ($USD Millions)Q3 2024Q4 2024Q1 2025
Homebuilding$1,572.2 $1,429.2 $1,012.9
Rental$64.2 $99.9 $11.9
Forestar$51.6 $108.5 $21.9
Financial services$91.3 $75.9 $48.6
Eliminations & Other$19.7 ($3.8) $14.6
Consolidated Pre-tax Income$1,799.0 $1,709.7 $1,109.9
KPIsQ3 2024Q4 2024Q1 2025
Net sales orders (homes)23,001 19,035 17,837
Net sales orders (value, $USD Billions)$8.72 $7.15 $6.65
Homes closed (homes)24,155 23,647 19,059
Home sales revenues ($USD Billions)$9.23 $8.93 $7.15
Average closing price ($USD)$382,200 $377,600 $374,900
Cancellation rate (%)18% 21% 18%
Sales order backlog (homes)16,792 12,180 11,003
Sales order backlog (value, $USD Billions)$6.55 $4.77 $4.30
Homes in inventory (total/unsold/completed)42,600/26,200/8,800 37,400/25,700/10,300 36,200/25,700/10,400
Lot portfolio (total; owned/controlled %)630,200; 24%/76% 632,900; 24%/76% 639,800; 24%/76%
Closings on Forestar/third-party lots (%)64% 64% 65%
Share repurchases ($USD Millions)$441.4 $561.2 $1,055.7
Shares outstanding (millions)327.37 324.03 317.65
Liquidity ($USD Billions)$5.8 $7.6 $6.5
Debt to total capital (%)18.8% 18.9% 17.0%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated revenuesFY 2025$36.0–$37.5B $36.0–$37.5B Maintained
Homes closedFY 202590,000–92,000 90,000–92,000 Maintained
Income tax rateFY 2025~24.5% ~24.0% Lowered
Share repurchasesFY 2025~$2.4B $2.6–$2.8B Raised
Dividend paymentsFY 2025~$500M ~$500M Maintained
Consolidated operating cash flowFY 2025> FY24 > FY24 Maintained
Consolidated revenuesQ2 2025N/A$7.7–$8.2B New
Homes closedQ2 2025N/A20,000–20,500 New
Home sales gross marginQ2 2025N/A21.5%–22.0% New
Consolidated pre-tax marginQ2 2025N/A13.7%–14.2% New
Quarterly dividendQ1 2025 eventN/A$0.40 payable 2/14/25 Declared

Earnings Call Themes & Trends

TopicQ3 2024 (Prior Two Quarters)Q4 2024 (Prior Quarter)Q1 2025 (Current)Trend
Incentives & gross marginMargin better than expected on lower incentive costs; guided flat Q4 margin Incentives rising; guided Q1 margin step-down; >80% buyers with buydowns Gross margin 22.7%; guided Q2 lower (21.5–22%) due to higher buydown costs Downward pressure persisting
Cycle times & spec strategyCycle times below historical average; spec used to provide certainty Further improvement; completed specs rose (no aging issue) Cycle times improved a few days QoQ, ~3 weeks YoY; 53% sold-and-closed intra-quarter Operational efficiency improving
Land/lot cost inflationLot costs up ~2.5% QoQ; low double-digit YoY; 20–25% of home sales revenue Lot costs expected mid-single-digit increases in FY25 Sequential +3%; ~10% YoY; expect low-to-mid single-digit ongoing Persistent cost inflation
Rental operations$64M pretax; merchant-build strategy $100M pretax; inventory ~$2.9B; remain around current level $11.9M pretax; margins impacted by capital markets/rates; inventory ~$3.0B Margin headwinds; stable inventory
Regional dynamics (FL/TX)Increasing inventory but competitive positioning intact Buyers on sidelines; inventory build noted Inventory pockets in FL/TX; monitoring demand into spring Mixed, cautious on pace
Capital returnsNew $4.0B authorization; buybacks $441M in Q3 FY25 plan ~$2.4B repurchases; dividend up to $0.40 FY25 repurchases raised to $2.6–$2.8B; accelerated Q1 buybacks More aggressive buybacks

Management Commentary

  • “We are well-positioned with our affordable product offerings and flexible lot supply, and we are focused on maximizing returns in each of our communities” .
  • “With 53% of our first quarter closings also sold in the same quarter, our sales, incentive levels and gross margin are generally representative of current market conditions” .
  • “Our incentive costs are expected to increase further on homes closed over the next few months, so we expect our home sales gross margin to be lower in the second quarter compared to the first quarter” .
  • “Based on our strong financial position… we now plan to repurchase between $2.6 billion and $2.8 billion of our common stock for the full year” .
  • “We remain focused on our relationships with land developers… 65% of our homes closed this quarter were on a lot developed by either Forestar or a third party” .

Q&A Highlights

  • Margin outlook: Q2 gross margin guided 21.5–22.0% due to higher incentive costs; backlog margins consistent with Q2 range; prevailing offered rates ~4.99–5.99% via buydowns .
  • Deliveries beat & intra-quarter dynamics: 53% sold-and-closed in quarter drove closings; improved build times supported upside .
  • Starts pace & BTO: Cycle-time improvements allow lower starts and quicker turns; potential to sell earlier in process while maintaining pace .
  • Rental margin pressure: Lower margins driven by capital market uncertainty and higher rates for rental buyers; expect improvement later in FY25/26 .
  • Regional commentary: Inventory build observed in parts of Florida/Texas; overall inventory “in pretty good shape” with competitive new-home advantages .

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for Q1 FY25 were unavailable at the time of analysis due to system limitations. As a result, comparisons vs Wall Street consensus are omitted (S&P Global consensus unavailable).
  • Where investors typically triangulate, management’s Q2 margin and pace guidance imply continued incentive-driven pressure; Street models may need to reflect lower gross margins and stronger buyback cadence .

Key Takeaways for Investors

  • Margin compression is the primary near-term headwind as incentive costs rise; Q2 guide embeds further decline in home sales gross margin, suggesting caution on near-term EPS leverage .
  • Strong buyback execution and raised FY25 repurchase plan ($2.6–$2.8B) are a key support for per-share metrics and could provide a floor in volatile tape .
  • Operational efficiency (cycle times) and spec strategy enable rapid backlog conversion; watch spring demand to validate FY25 volume guide (90–92K closings) .
  • Lot cost inflation remains sticky; pricing/mix actions (smaller/attached product) and construction cost stability are critical to defending returns .
  • Rental margins likely subdued near term; capital markets normalization would be a potential upside lever in back half of FY25/FY26 .
  • Regional inventory pockets (FL/TX) warrant monitoring; management cites competitive rate buydowns vs resale as a mitigating factor .
  • Trading implication: near-term narrative hinges on gross margin trajectory and Q2 execution; medium-term thesis remains supported by capital returns, cycle-time gains, and affordable product positioning .

S&P Global consensus unavailable.