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HORTON D R INC /DE/ (DHI)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 2025 revenue was $9.68B, above Wall Street consensus, while diluted EPS of $3.04 missed; home sales gross margin stepped down to 20.0% on higher incentives and an unusual 60 bps litigation charge . Consensus for Q4: EPS 3.27* vs actual 3.04; revenue 9.42B* vs actual 9.68B; EBITDA 1.37B* vs actual ~1.23B. Values retrieved from S&P Global.
  • Net sales orders rose 5% YoY to 20,078 homes (value +3% to $7.33B) as operators “balanced pace, price and incentives” amid affordability constraints; cancellation rate was 20% vs 21% prior-year .
  • FY26 initial guidance: revenue $33.5–$35.0B, 86–88K homes closed, ~24.5% tax rate, ≥$3.0B operating cash flow, ~$2.5B buybacks, ~$500M dividends; Q1 FY26 guide: revenue $6.3–$6.8B, 17.1–17.6K closings, home sales gross margin 20.0–20.5%, consolidated pre-tax margin 11.3–11.8% .
  • Dividend increased 13% to $0.45 per share; Q4 buybacks were $689M (4.6M shares), with $4.3B repurchased in FY25; liquidity stood at $6.6B and leverage at 19.8% .

What Went Well and What Went Wrong

  • What Went Well
    • Revenue beat vs consensus; orders +5% YoY despite choppy demand. “Our tenured operators continued to respond…balancing pace, price and incentives to meet demand” .
    • Strong balance sheet and cash generation enabled capital returns: $4.8B returned in FY25; $6.6B liquidity; leverage ~19.8% .
    • FY26 guidance underscores confidence and discipline (≥$3.0B op cash flow; ~$2.5B buybacks; ~$500M dividends) .
  • What Went Wrong
    • EPS miss vs consensus; gross margin decline to 20.0% on elevated incentives and 60 bps litigation costs; exit gross margin lower than expected .
    • Homebuilding pre-tax margin compressed to 11.7%; consolidated pre-tax margin to 12.4% vs Q3 14.7% .
    • Lot costs up ~8% YoY (per sq ft) and expected to remain sticky into 2026 closings; ASP pressured by smaller homes and incentives; ASP $365.6K down 3% YoY .

Financial Results

MetricQ2 2025Q3 2025Q4 2025
Revenue ($USD Billions)$7.734 $9.226 $9.678
Diluted EPS ($)$2.58 $3.36 $3.04
Consolidated Pre-tax Margin (%)13.8% 14.7% 12.4%
Home Sales Gross Margin (%)21.8% 21.8% 20.0%
MetricQ4 2024Q4 2025
Revenue ($USD Billions)$10.003 $9.678
Diluted EPS ($)$3.92 $3.04
Consolidated Pre-tax Margin (%)17.1% 12.4%
Segment (Q4 2025)Revenue ($USD Millions)Pre-tax Income ($USD Millions)Pre-tax Margin (%)
Homebuilding$8,564.4 $1,000.7 11.7%
Rental$805.4 $80.5 N/A (provided separately)
Forestar$670.5 $113.1 16.9%
Financial Services$218.3 $75.8 34.7%
KPIsQ2 2025Q3 2025Q4 2025
Net Sales Orders (Homes)22,437 23,071 20,078
Net Sales Orders ($USD Billions)$8.359 $8.422 $7.326
Closings (Homes)19,276 23,160 23,368
Closings ($USD Billions)$7.181 $8.561 $8.544
Average Closing ASP ($)N/A$369,600 $365,600
Cancellation Rate (%)16% 17% 20%
Backlog (Homes)14,164 14,075 10,785
Backlog ($USD Billions)$5.477 $5.338 $4.120
Active Communities (YoY)+10% +12% +13%
Rate Buy-down Uptake (%)N/AN/A73% of closings
Estimates vs ActualsQ4 2024Q3 2025Q4 2025
EPS Consensus Mean ($)4.17*2.90*3.27*
EPS Actual ($)3.92 3.36 3.04
Revenue Consensus Mean ($USD Billions)10.195*8.761*9.422*
Revenue Actual ($USD Billions)10.003 9.226 9.678
EBITDA Consensus Mean ($USD Billions)1.889*1.261*1.365*
EBITDA Actual ($USD Billions)1.688 IS + cash flow; management stated consolidated pre-tax $1.205B; use reported EBITDA actual 1.234 per estimates output]1.369 ~1.234 [GetEstimates actual]

Values retrieved from S&P Global. Consensus cells marked with *.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/ActualChange
Q4 Revenue ($B)Q4 FY25$9.1–$9.6 $9.68 actual In line to high end
Q4 Homes Closed (K)Q4 FY2523.5–24.0 23.37 actual Slightly below midpoint
Q4 Home Sales Gross Margin (%)Q4 FY2521.0–21.5 20.0 actual (60 bps litigation; elevated incentives) Lower
Q4 Consolidated Pre-tax Margin (%)Q4 FY2513.6–14.1 12.4 actual Lower
FY25 Revenue ($B)FY25$33.7–$34.2 $34.25 actual Above midpoint
FY25 Homes Closed (K)FY2585.0–85.5 84.86 actual Slightly below
Tax Rate (%)FY25~24.0 24.0–24.5 implied; Q4 tax expense $288M Maintained
DividendOngoing$0.40 $0.45 (↑13%) Raised
FY26 Revenue ($B)FY26—$33.5–$35.0 New
FY26 Homes Closed (K)FY26—86–88 New
FY26 Op Cash Flow ($B)FY26—≥$3.0 New
FY26 Buybacks ($B)FY26—~$2.5 New
FY26 Dividends ($M)FY26—~$500 New
Q1 FY26 Revenue ($B)Q1 FY26—$6.3–$6.8 New
Q1 FY26 Homes Closed (K)Q1 FY26—17.1–17.6 New
Q1 FY26 Home Sales GM (%)Q1 FY26—20.0–20.5 New
Q1 FY26 Pre-tax Margin (%)Q1 FY26—11.3–11.8 New

Earnings Call Themes & Trends

TopicQ2 FY25 (Apr)Q3 FY25 (Jul)Q4 FY25 (Oct)Trend
Incentives & Rate Buy-downsExpected to increase; margin guide lower Incentives rising; Q4 margin step-down guided Elevated; 3.99% used more; 73% closings with buy-down Higher incentives; sustained into FY26
Gross Margin21.8%; guide lower in 2H 21.8% (flat); Q4 guide down 50 bps 20.0%; 60 bps litigation; Q1 FY26 20–20.5% Down sequentially
Lot Costs & Stick & BrickLot costs +10% YoY; +3% seq; stick & brick flat Lot cost mid-single-digit YoY; slight seq moderation; stick & brick -1% seq, -2% YoY Lot cost +8% YoY; stick & brick targeted reductions in 2026 Lot costs sticky; vertical cost reduction efforts
Supply Chain/LaborCycle time improves; labor available Cycle times improved further; labor plentiful Continued efficiency; fewer specs needed Efficiency improving
Orders/Community CountOrders -15% YoY; communities +10% YoY Orders flat YoY; communities +12% YoY Orders +5% YoY; avg communities +13% YoY Stabilizing orders; footprint expansion
RegionalNorth/East stronger; Texas/Florida mixed Florida dynamics changing; Northwest lagging Texas “choppy”; Florida inventory issues; California challenging Mixed; pockets of softness
Rental OpsMerchant build; monetizing pre-stabilization 3Q PBT $55M; guide lower margins in 4Q Q4 PBT $80.5M on $805.4M revenue Variable; margin pressure expected
SG&A & Cash FlowSG&A up on platform; focus on cash conversion SG&A ~7.8%; aim 7–8% LT; cash conversion ~100% HB Operating cash flow $3.4B FY25; FY26 ≥$3.0B Efficiency focus; strong cash yield
Tariffs/LumberWatching tariffs; ~20% Canadian lumber Potential impact beyond FY25 No new quant; cost vigilance Monitor 2026 impact
ARMs UsageNot highlightedNot highlightedARMs mid-to-high single digit of closings; drifting up Gradual uptake

Management Commentary

  • “Our tenured operators continued to respond to market conditions with discipline to drive a 5% increase in net sales orders, while carefully balancing pace, price and incentives to meet demand.” — David Auld, Executive Chairman .
  • “We expect our home sales gross margin for the first quarter to be in the range of 20% to 20.5%… incentive levels to remain elevated in fiscal 2026.” — Jessica Hansen, SVP Communications .
  • “Our consolidated leverage at fiscal year end was 19.8%… book value per share was up 5% to $82.15.” — Bill Wheat, CFO .
  • “Our lot position ~592,000 lots… 25% owned / 75% controlled; cycle times improved, enabling fewer specs.” — Mike Murray/Paul Romanowski .

Q&A Highlights

  • Gross margin bridge: 60 bps unusual litigation in Q4 not expected to persist; baseline incentives remain elevated, guiding Q1 GM 20–20.5% .
  • Starts pace: Intentional slowdown in Q4 to right-size inventory; plans to ramp starts into spring; cycle times allow lower spec levels .
  • Rental profitability: Expect back-half weighting and lower rental margins in Q1/Q2 FY26; consolidation of revenues stable .
  • Lot costs: ~8% YoY increase; stick & brick targeted to offset 3–5% to hold margins; lot cost relief seen only several quarters out .
  • Regional trends: Texas “choppy”; Florida (Jacksonville/SW FL) inventory challenges; California challenging; Midwest/Mid-Atlantic stable .
  • Incentives mix: Greater use of FHA 3.99% buy-down offer; backlog mortgage rates below 5%; broker commissions ~270 bps impact in GM .

Estimates Context

  • Q4 beats/misses vs S&P Global consensus: EPS 3.27* vs 3.04 (miss), Revenue 9.42B* vs 9.68B (beat), EBITDA 1.37B* vs ~1.23B (miss). Values retrieved from S&P Global.
  • Q3 saw EPS and revenue beats vs consensus (EPS 2.90* vs 3.36; revenue 8.76B* vs 9.23B). Values retrieved from S&P Global.
  • FY26 consensus EPS 11.40* and revenue 34.37B* sit broadly in line with company FY26 revenue guide $33.5–$35.0B; elevated incentives and sticky lot costs could bias EPS consensus lower absent offsetting stick & brick savings .

Key Takeaways for Investors

  • Revenue resilience but margin pressure: Incentives and lot cost inflation compressed margins; litigation added a one-time 60 bps drag — monitor Q1 GM recovery to 20–20.5% .
  • Orders stable-to-improving: +5% YoY orders and disciplined inventory/starter cadence support FY26 closings of 86–88K if spring demand holds .
  • Cash returns durable: FY25 op cash flow $3.4B; FY26 plan ≥$3.0B with ~$2.5B buybacks and ~$500M dividends; dividend lifted to $0.45 .
  • Cost actions critical: Company prioritizes stick & brick savings (3–5% target) to offset mid–high single-digit lot cost inflation; watch tariff impacts into 2026 .
  • Regional dispersion: Texas/Florida choppiness and California pressure vs Midwest/Mid-Atlantic stability — favor divisions with constrained resale supply .
  • Valuation drivers: EPS miss vs consensus from margin dynamics contrasts with revenue beat; consensus may need to recalibrate for sustained higher incentives. Values retrieved from S&P Global.
  • Tactical setup: Near-term trades hinge on evidence of GM stabilization in Q1 FY26 and spring demand; dividend/buyback support provides downside buffer .

Values retrieved from S&P Global.