HORTON D R INC /DE/ (DHI)·Q2 2025 Earnings Summary

Executive Summary

• Q2 FY25 missed S&P Global consensus on both EPS and revenue as a slower-than-expected spring selling season, elevated incentives, and higher SG&A weighed on results; diluted EPS was $2.58 on $7.73B revenue vs consensus $2.70 and $8.03B, respectively (miss) . Consensus values from S&P Global.*
• Management cut full‑year guidance for revenue to $33.3–$34.8B (from $36.0–$37.5B) and homes closed to 85–87k (from 90–92k), while sharply raising FY25 buyback plans to ~$4B and adding >$3B operating cash flow guidance .
• Gross margin on home sales was 21.8% (midpoint of prior guide) and is guided to 21.0%–21.5% in Q3; incentives are expected to remain elevated given affordability constraints and macro uncertainty .
• Capital returns accelerated: DHI repurchased 9.7M shares for $1.3B in Q2, year‑to‑date $2.4B, and approved a new $5.0B authorization; liquidity remains strong at $5.8B with low leverage (Moody’s upgraded to A3) .
• Key near‑term catalysts: trajectory of incentives/margins into Q3, spring/summer demand pace vs guide, and any tariff‑driven cost pressures into FY26 .

What Went Well and What Went Wrong

• What Went Well

  • Liquidity and balance sheet resilience: $2.5B cash, $3.3B undrawn credit for $5.8B liquidity; Moody’s upgraded to A3; consolidated leverage around ~20% target .
  • Capital allocation ramp: $1.3B Q2 repurchases, ~$4B FY25 buyback plan, and new $5B authorization; dividend maintained at $0.40/share .
  • Operational execution amid softer demand: home sales gross margin of 21.8% (mid‑guide), improved cycle times, and reduced completed spec inventory by ~2,000 QoQ to 8,400 .

• What Went Wrong

  • Top‑line softness vs last year and consensus: revenue down 15% YoY to $7.73B and homes closed down 15% YoY to 19,276; EPS fell 27% YoY to $2.58; consensus revenue/EPS were higher . Consensus values from S&P Global.*
  • Incentive pressure and SG&A deleverage: gross margin expected to be lower in 2H if incentives rise; homebuilding SG&A reached 8.9% of revenue (up 170 bps YoY) amid platform expansion .
  • Guidance reset: FY25 revenue and closings lowered, reflecting softer spring start and affordability headwinds; order backlog units and value remain below prior year .

Management quotes

• “The 2025 spring selling season started slower than expected… our home sales gross margin was 21.8%, at the midpoint of our guidance range.”
• “We expect our incentive levels to remain elevated… our home sales gross margin will likely be lower… compared to the second quarter.”

Financial Results

Values retrieved from S&P Global.*

Segment revenue ($B)

Key KPIs and balance metrics

Guidance Changes

Notes: New $5.0B repurchase authorization approved in April, replacing prior authorization .

Earnings Call Themes & Trends

Management Commentary

• “Our tenured operators are responding appropriately to market conditions by increasing sales incentives where necessary to drive traffic and incremental sales, while carefully balancing pace versus price to maximize returns.”
• “We expect our incentive levels to remain elevated… our home sales gross margin will likely be lower in the [second half] compared to the second quarter.”
• “Homebuilding SG&A… was 8.9%, up 170 basis points… primarily due to the expansion of our operating platform.”
• “We repurchased 9.7 million shares… for $1.3 billion… we now plan to repurchase approximately $4 billion of our common stock in fiscal 2025.”
• “At March 31, we had $5.8 billion of consolidated liquidity… Moody’s upgraded our credit rating to A3.”

Q&A Highlights

• Margin bridge and incentive sensitivity: If incentives are flat sequentially, gross margin could trend toward the high end of the Q3 21.0–21.5% range, but volatility in rates makes prediction challenging .
• Tariffs and lumber exposure: ~20% of lumber sourced from Canada; any tariff‑driven cost impact would likely show up toward the end of FY25 and into FY26; management expects to leverage scale to mitigate cost inflation .
• Starts/spec strategy: Starts expected to accelerate in Q3 as cycle times improve; completed specs reduced by ~2,000 QoQ, aiding cash conversion .
• Land/lots inflation: Land and lot costs up 3% QoQ and 10% YoY; no broad pullback in land prices; cost of lots typically flows through COGS within 2–3 quarters .
• SG&A leverage: Elevated due to footprint expansion (communities +10% YoY); expect better leverage in Q3–Q4 on higher closings; longer term, SG&A rate expected to decline with volume .

Estimates Context

• Q2 FY25 vs S&P Global consensus: Revenue $7.73B vs $8.03B (miss); EPS $2.58 vs $2.70 (miss). 12 revenue and 18 EPS estimates contributed to consensus . Consensus values and counts from S&P Global.*
• Q1 FY25 vs S&P Global consensus: Revenue $7.61B vs $7.08B (beat); EPS $2.61 vs $2.36 (beat). 12 revenue and 17 EPS estimates . Consensus values and counts from S&P Global.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

• Reset year in progress: FY25 revenue/closings guidance lowered, reflecting affordability‑driven demand softness and elevated incentives; watch order pace into summer vs guide .
• Margins likely troughing near term: Q2 home sales gross margin 21.8%; Q3 guide 21.0–21.5% with incentive trajectory the swing factor .
• Capital returns as support: ~$4B FY25 buybacks and a new $5B authorization provide downside support to EPS and share count amidst softer top‑line .
• Balance sheet optionality: $5.8B liquidity, ~20% leverage target, and A3 upgrade position DHI to play offense on land and repurchases if conditions stabilize .
• Cost watch items for FY26: potential tariff impacts on lumber/materials and continuing land‑cost inflation could pressure gross margins without pricing power .
• Operational execution: Faster cycle times and leaner spec balance improve cash conversion and flexibility, mitigating volume volatility .
• Mix remains favorable: 63% first‑time buyer exposure and focus on affordable product align with demand segments despite rate volatility .