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HORTON D R INC /DE/ (DHI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered a solid operational quarter with consolidated revenue of $9.23B and diluted EPS of $3.36; both exceeded Wall Street consensus estimates, driven by higher-than-expected closings and stable home sales gross margin of 21.8% .
  • Guidance was narrowed for FY2025: revenue to $33.7–$34.2B (from $33.3–$34.8B), homes closed to 85,000–85,500 (from 85,000–87,000), and share repurchases raised to $4.2–$4.4B (from ~$4.0B) .
  • Management flagged elevated incentives into Q4 (gross margin guide 21.0–21.5% and pre-tax margin 13.6–14.1%), with affordability and cautious consumer sentiment the primary headwinds; nonetheless, liquidity remained strong at $5.5B and leverage at 23.2% .
  • Stock reaction catalyst: clear beat vs consensus on Q3 EPS/revenue with disciplined capital return ($1.2B repurchases, $122M dividend), tempered by a lower Q4 margin outlook and narrowed FY revenue range—net positive near term, balanced by incentive trajectory .

What Went Well and What Went Wrong

What Went Well

  • Closings and margin exceeded expectations: 23,160 homes closed and home sales gross margin of 21.8% (above guidance), aided by disciplined pace vs price management and improved cycle times .
  • Strong capital return and reduced share count: 9.7M shares repurchased ($1.2B) in Q3; share count down 9% YoY; remaining authorization $4.0B .
  • Operating efficiency and ROE/ROA: trailing 12-month ROE 16.1% and ROA 11.1%; homebuilding ROI 22.1%; consolidated liquidity $5.5B; debt-to-capital 23.2% .

Management quote: “We closed more homes than the high end of our guidance range, while maintaining a home sales gross margin of 21.8%... balancing pace versus price to maximize returns.”

What Went Wrong

  • Top-line and earnings declined YoY: revenue down 7% YoY to $9.23B; diluted EPS down 18% YoY to $3.36, reflecting affordability pressure and higher incentives .
  • Elevated incentives persist and will increase in Q4, driving guided sequential gross margin decline (21.0–21.5%) and lower rental segment margins in Q4 .
  • Backlog contracted: homes under contract down 16% to 14,075 and value down 19% to $5.34B; order value down 3% despite flat orders YoY .

Financial Results

Quarterly Progression vs Prior Periods

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$7.61 $7.73 $9.23
Diluted EPS ($)$2.61 $2.58 $3.36
Pre-tax Profit Margin (%)14.6% 13.8% 14.7%
Home Sales Gross Margin (%)—21.8% 21.8%
Homes Closed (Units)19,059 19,276 23,160

YoY Comparison (Q3 FY2025 vs Q3 FY2024)

MetricQ3 2024Q3 2025
Revenue ($USD Billions)$9.97 $9.23
Diluted EPS ($)$4.10 $3.36
Net Income ($USD Billions)$1.35 $1.02

Actual vs Consensus (Q3 FY2025)

MetricConsensusActualSurprise
Revenue ($USD Billions)$8.76*$9.23 +$0.47B (Beat)*
EPS ($)$2.90*$3.36 +$0.46 (Beat)*
EBITDA ($USD Billions)$1.26*$1.37 +$0.11B (Beat)*

Values with * retrieved from S&P Global.

Segment Breakdown (Q3 FY2025 vs Q3 FY2024)

SegmentRevenue Q3 2024 ($MM)Revenue Q3 2025 ($MM)Pre-tax Income Q3 2024 ($MM)Pre-tax Income Q3 2025 ($MM)
Homebuilding$9,231.2 $8,561.0 $1,572.2 $1,186.3
Rental$413.7 $380.7 $64.2 $54.8
Forestar$318.4 $390.5 $51.6 $43.6
Financial Services$242.3 $227.8 $91.3 $81.3
Eliminations & Other$(250.2) $(354.1) $19.7 $(7.9)
Consolidated$9,965.7 $9,225.7 $1,799.0 $1,358.1

KPIs and Operating Metrics

KPIQ3 2024Q3 2025
Net Sales Orders (Homes)23,001 23,071
Net Sales Orders (Value $MM)$8,715.7 $8,422.3
Cancellation Rate (%)18% 17%
Homes Closed (Homes)24,155 23,160
Homes Closed (Value $MM)$9,231.2 $8,561.0
Backlog (Homes)16,792 14,075
Backlog (Value $MM)$6,554.0 $5,338.1
Average Closing Price ($)—$369,600
Avg Price of Net Orders ($)—$365,100
Starts (Homes)—24,700
Homebuilding SG&A (% of Revenue)7.1% (derived from call; no explicit Q3 2024 %)7.8%
Home Sales Gross Margin (%)21.8% (guide midpoint) 21.8%
% Closings Sold in Same Quarter—54%
Avg Square Footage (Closed)~1,976 (implied trend; not explicitly stated)1,956
Homebuilding ROI (TTM)—22.1%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated RevenueFY2025$33.3–$34.8B $33.7–$34.2B Narrowed
Homes ClosedFY202585,000–87,000 85,000–85,500 Lowered (upper bound)
Share RepurchasesFY2025~$4.0B $4.2–$4.4B Raised
Income Tax RateFY2025~24% ~24% Maintained
Cash Flow from OpsFY2025>$3.0B >$3.0B Maintained
Dividend PaymentsFY2025~$500M ~$500M Maintained
Consolidated RevenueQ4 2025—$9.1–$9.6B New
Homes ClosedQ4 2025—23,500–24,000 New
Home Sales Gross MarginQ4 2025—21.0–21.5% New
Consolidated Pre-tax MarginQ4 2025—13.6–14.1% New

Earnings Call Themes & Trends

TopicQ-2 Mentions (Q2 FY2025)Q-1 Mentions (Q1 FY2025)Current Period (Q3 FY2025)Trend
Affordability & IncentivesSpring selling slower; incentives used; GM 21.8% Incentives (rate buydowns); smaller floor plans Incentives choppy but rising into Q4; GM guide down 50 bps; FHA 3.99% traffic driver Incentives increasing
Mortgage RatesCautious sentiment; rate buydowns used Rate buydowns supporting demand Offering rates ~1–1.5 pts below market; backlog/closings avg just over 5% Continued reliance
Cycle Times & InventoryNoted operations efficiency Strong liquidity; ROI 26.7% Cycle times improved; completed spec count down; starts aligned with sales Improving
Land/Lot CostsModeration anticipated Flexible lot supply Stick & brick down ~2% YoY; lot costs mid-single-digit YoY; slight sequential moderation Mixed/moderating
Rental OperationsLower margins YoY SFR/MFR sales modest Q3 revenue/margins better; Q4 margins expected lower Near-term margin pressure
Broker Commissions——Broker attach >80%; ~270 bps impact if normalized Stable relationships
Regional Trends——Northwest lagging (tech buyer/job uncertainty); otherwise stable sequential increases Mixed regionally
Resale Competition——Resale not a major headwind; new homes remain attractive vs older stock Limited impact
Tariffs/Macro——Canadian softwood tariff potential impact; not quantified Cost risk watch

Management Commentary

  • Prepared remarks emphasized beating closings/margin expectations and disciplined pace vs price: “Our tenured operators continue to respond to market conditions with discipline…” .
  • Capital allocation discipline with increased buybacks and steady dividends while maintaining liquidity and leverage targets: “We have the room to devote a bit more capital to share repurchase this year… valuation is attractive.” .
  • Caution on incentives and Q4 margin trajectory: “We expect our sales incentives to remain elevated and increase further during the fourth quarter…” .

Q&A Highlights

  • Incentives: rising into Q4; margin guide implies ~50 bps sequential decline; FHA at 3.99% mostly a traffic driver; average commission ~270 bps if normalized .
  • Costs and labor: stick & brick down ~2% YoY (1% sequential); lot cost inflation mid-single-digit with slight sequential moderation; ample labor driving cycle time improvement .
  • Community count: up 12% YoY and 4% sequential; expected to moderate to mid/high single-digit growth into FY2026 .
  • Rental segment: Q3 margins better; expected lower in Q4 despite similar/better revenue .
  • Demand/resale: resale inventory not materially impacting conversions; first-time buyers 64%, average FICO ~720, LTV ~90%; mortgage company financed 81% of buyers .

Estimates Context

  • Q3 FY2025 beat: Revenue $9.23B vs $8.76B consensus*; EPS $3.36 vs $2.90 consensus*; EBITDA $1.37B vs $1.26B consensus* .
  • Q4 FY2025 outlook vs consensus: Company guided revenue $9.1–$9.6B; consensus revenue ~$9.42B*, implying midpoint ~$9.35B broadly in-line. No EPS guidance provided; margin guides suggest cautious stance .

Values with * retrieved from S&P Global.

Key Takeaways for Investors

  • Q3 prints were clean beats on revenue and EPS with stable home sales margins; near-term stock drivers include how incentives flow-through in Q4 and the degree of margin compression vs guide .
  • Capital returns remain aggressive (FY repurchases lifted to $4.2–$4.4B), supported by strong liquidity and manageable leverage; expect continued buyback support into year-end .
  • Order trends stable (flat YoY orders, +3% sequential), but backlog down and order value -3% YoY; monitor affordability-sensitive segments and order ASP trajectory .
  • Cost environment improving modestly (stick & brick down; cycle times better), partially offsetting higher incentives; land cost inflation mid-single-digit persists but showing early moderation .
  • Rental segment a swing factor: Q4 margins expected lower; watch asset sales timing and cap rate dynamics .
  • Guidance narrowed: top line range tightened and closings upper bound lowered, but buybacks raised; narrative suggests disciplined growth with return focus .
  • Medium-term thesis: scale, lot optionality (Forestar), and operational discipline underpin returns; key risks include affordability, mortgage rate volatility, and potential tariff impacts .