D.R. Horton Profit Falls as Margins Narrow
The home builder’s cancellation rate climbed to 20% as sales orders stalled.
D.R. Horton, Inc. (DHI) reported a 12% drop in fiscal third-quarter net income as elevated sales incentives weighed on the home builder’s margins. Revenue was essentially flat at $9.23 billion, while pre-tax income fell 9.7% to $1.23 billion and the pre-tax margin narrowed to 13.3% from 14.7% a year earlier.
The quarter marked a sequential recovery from the winter selling season, though demand lost momentum from earlier in the year. Revenue rebounded from $7.6 billion in the second quarter and $6.9 billion in the first, while the pre-tax margin improved from 11.5% and 11.6%, respectively.
Net income declined to $904.9 million, but diluted earnings fell a smaller 5% to $3.20 a share as the weighted-average diluted share count dropped to 283.0 million from 304.9 million. Shares outstanding were 6% lower than a year earlier.
Home-sales revenue rose 1% to $8.68 billion as closings increased 4% to 23,983. Average revenue per home closed declined roughly 2% to about $362,000, and the home-sales gross margin contracted about 110 basis points to 20.7% as incentives remained elevated.
Orders provided a softer signal. Net sales orders were essentially flat at 23,084 homes after year-over-year unit growth of 11% in the second quarter, and they fell 7.6% sequentially. Backlog still increased 13.6% to 15,983 homes, with its value rising 15.8% to $6.18 billion.
Outside homebuilding, rental operations revenue fell 30% to $266.1 million and pre-tax income dropped 43% to $31.0 million. Forestar moved in the other direction, increasing revenue 4% to $407.0 million and pre-tax income 12% to $48.7 million.
D.R. Horton now expects fiscal 2026 consolidated revenue of $32.5 billion to $33.0 billion and 83,800 to 84,300 home closings. It continues to project at least $3.0 billion of operating cash flow, about $2.5 billion of share repurchases and approximately $500 million of dividends.
The company repurchased 4.2 million shares for $615.7 million during the quarter, down from 6.0 million shares for $903.6 million in the second quarter. Meanwhile, debt as a share of total capital rose for a second consecutive quarter to 23.0%, leaving D.R. Horton with higher leverage as it carried more homes in inventory.