D.R. Horton, Inc. (DHI) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong demand, strategic cost management, and positive market outlook, particularly for first-time homebuyers. The company maintains a balanced approach to inventory and starts, with plans to increase share repurchases. Despite some uncertainties, such as SG&A guidance, the optimistic guidance and strategic focus on affordability and community expansion suggest a positive stock price movement.
Key Financial Performance
Consolidated Pretax Income $798 million on $6.9 billion of revenues, with a pretax profit margin of 11.6%. This reflects a solid start to fiscal 2026 despite affordability constraints and cautious consumer sentiment.
Net Income $595 million on consolidated revenues of $6.9 billion. Earnings per diluted share were $2.03 compared to $2.61 in the prior year quarter, reflecting a decrease in profitability.
Home Sales Revenues $6.5 billion on 17,818 homes closed, compared to $7.1 billion on 19,059 homes closed in the prior year quarter. The decrease is attributed to lower home closings volume.
Average Closing Price $365,500, flat sequentially and down 3% year-over-year. This reflects pricing adjustments in response to market conditions.
Net Sales Orders Increased 3% from the prior year quarter to 18,300 homes, while order value remained unchanged at $6.7 billion. This indicates stable demand despite market challenges.
Cancellation Rate 18%, consistent with the prior year quarter and down from 20% sequentially, showing improved buyer commitment.
Gross Profit Margin on Home Sales Revenues 20.4%, up 40 basis points sequentially due to a recovery of prior period warranty costs. Excluding this benefit, the margin would have been 20%.
Homebuilding SG&A Expenses Decreased 1% from last year, but as a percentage of revenues, it increased to 9.7% from 8.9% due to lower home closings volume.
Home Starts 18,500 homes in the December quarter, up 27% sequentially from the fourth quarter, reflecting increased activity.
Rental Operations Revenues $110 million from the sale of 397 single-family rental homes, highlighting diversification in revenue streams.
Financial Services Pretax Income $58 million on $185 million of revenues, resulting in a pretax profit margin of 31.4%.
Forestar Revenues $273 million on 1,944 lots sold, with pretax income of $21 million, showcasing contributions from the lot development segment.
Homebuilding Cash Provided by Operations $498 million, contributing to consolidated cash provided by operations of $854 million, reflecting strong cash flow generation.
Share Repurchases 4.4 million shares repurchased for $670 million, reducing the outstanding share count by 9% from a year ago.
Stockholders' Equity $24 billion, down 4% from a year ago, with book value per share at $82.60, up 5% from a year ago.
Consolidated Liquidity $6.6 billion, consisting of $2.5 billion of cash and $4.1 billion of available capacity on credit facilities, ensuring financial flexibility.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
New Home Sales: Net sales orders increased 3% year-over-year to 18,300 homes, with an average price of $364,000, flat sequentially and down 2% year-over-year. 64% of mortgage closings were to first-time homebuyers.
Rental Operations: Generated $110 million in revenue from the sale of 397 single-family rental homes. Rental property inventory was valued at $2.9 billion.
Market Share: Average number of active selling communities increased 12% year-over-year. Focused on gaining market share efficiently.
Lot Development: Homebuilding lot position at 590,500 lots, with 25% owned and 75% controlled through purchase contracts. Investments in lots, land, and development totaled $2 billion in Q1.
Operational Efficiency: Improved cycle times reduced inventory and increased efficiency. Median cycle time from start to close decreased by 2 weeks year-over-year.
Capital Efficiency: Generated $498 million in homebuilding cash from operations in Q1. Returned $4.4 billion to shareholders over the past 12 months through repurchases and dividends.
Incentives and Pricing Strategy: Increased sales incentives in Q1 to address affordability constraints and cautious consumer sentiment. Expect incentives to remain elevated in fiscal 2026.
Financial Flexibility: Maintained strong balance sheet with $6.6 billion in liquidity and low leverage at 18.8%. Plan to maintain leverage around 20% long-term.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Affordability constraints and cautious consumer sentiment: New home demand is impacted by affordability constraints and cautious consumer sentiment, which could limit sales growth and revenue.
Elevated sales incentives: The company expects sales incentives to remain elevated in fiscal 2026, which could pressure profit margins depending on demand and mortgage interest rate changes.
Decline in home closings and revenues: Home closings and revenues have decreased compared to the prior year, which could impact overall financial performance.
Cancellation rates: The cancellation rate for the quarter was 18%, which, while consistent with the prior year, represents a potential risk to sales stability.
Market conditions and mortgage interest rates: Changes in market conditions and mortgage interest rates could significantly impact demand, sales incentives, and profit margins.
Inventory management: The company has 20,000 unsold homes in inventory, including 900 completed for over 6 months, which could lead to increased holding costs and reduced profitability.
Increased SG&A expense ratio: The SG&A expense ratio increased due to lower home closings volume, which could affect operational efficiency.
Economic volatility and uncertainty: The company acknowledges current economic volatility and uncertainty, which could impact its ability to achieve strategic objectives.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Projections: For the second quarter, consolidated revenues are expected to range between $7.3 billion and $7.8 billion. For the full fiscal year 2026, consolidated revenues are projected to be approximately $33.5 billion to $35 billion.
Home Closings: Home closings for the second quarter are expected to range between 19,700 and 20,200 homes. For the full fiscal year 2026, home closings are projected to be in the range of 86,000 to 88,000 homes.
Gross Margin: Home sales gross margin for the second quarter is expected to range between 19% and 19.5%. For the full fiscal year, gross margin levels will depend on demand, mortgage interest rates, and market conditions.
Profit Margin: Consolidated pretax profit margin for the second quarter is expected to range between 10.6% and 11.1%.
Operating Cash Flow: Operating cash flow for fiscal 2026 is forecasted to be at least $3 billion.
Stock Repurchases and Dividends: For fiscal 2026, the company plans to repurchase approximately $2.5 billion in common stock and pay around $500 million in dividends.
Market Conditions and Incentives: Sales incentives are expected to remain elevated throughout fiscal 2026, with levels dependent on demand, mortgage interest rates, and overall market conditions.
Home Starts and Inventory: Home starts in the second quarter are expected to be higher than the first quarter. The company will continue to manage inventory and start pace based on market conditions.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividends Paid: During the first quarter, D.R. Horton paid cash dividends of $0.45 per share, totaling $132 million.
Future Dividend Plans: The Board has declared a quarterly dividend at the same level ($0.45 per share) to be paid in February.
Annual Dividend Forecast: For fiscal 2026, the company expects to pay dividend payments of around $500 million.
Share Repurchase in Q1: D.R. Horton repurchased 4.4 million shares of common stock for $670 million during the first quarter.
Annual Share Repurchase Forecast: The company plans to repurchase approximately $2.5 billion worth of common stock in fiscal 2026.
Outstanding Share Count: The outstanding share count is down 9% from a year ago due to repurchases.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What was the reason for the higher SG&A levels despite closings meeting expectations?
A:The higher SG&A levels were attributed to lower closings year-over-year, which resulted in less leverage on SG&A. However, SG&A was relatively in line with the plan, and the company expects SG&A as a percentage of revenues to stabilize over the year.
Q:What is the company's guidance for cash flow conversion and cash flow expectations?
A:The company reiterated its guidance for consolidated cash flow greater than $3 billion and stated that it is tracking in line with expectations. The cash flow conversion target of about 100% remains reasonable.
Q:What is the outlook for community count growth for the year?
A:Community count growth was up 12% year-over-year in Q1, but the company expects it to drift down to mid-single to high single-digit growth as the year progresses.
Q:What are the factors affecting gross margin and cost trends?
A:Gross margin in Q1 was 20.0%, down from 20.6% in Q4. The Q2 gross margin guide is 19% to 19.5%. Factors include flat stick and brick costs, slightly higher lot costs, and increased use of incentives. Warranty and litigation costs also impacted margins.
Q:How are incentives and mortgage rates affecting demand and margins?
A:Incentives, including interest rate locks and temporary buydowns, increased throughout Q1, impacting margins. If mortgage rates continue to compress, the cost of providing incentives may decrease, but this is not yet factored into guidance.
Q:What is the company's view on demand trends and the impact of lower mortgage rates?
A:Demand trends were consistent with seasonal expectations, and lower mortgage rates around 6% spurred activity in sales offices. The company feels well-positioned for the spring selling season.
Q:What is the company's strategy for the single-family rental (SFR) business amid policy uncertainty?
A:The company focuses on purpose-built communities for its SFR business and has shifted to a forward sale model. It does not expect significant impact from proposed bans on institutional buyers of single-family homes.
Q:What is the outlook for land costs and development inflation?
A:The company has not seen significant price reductions in raw land but has observed some progress in development costs and improved terms with land development partners. There is no broad distress in the land market.
Q:What are the trends in year-to-date demand and supply?
A:Demand has been strong, especially when mortgage rates are around 6%. The company has seen a rational approach to starts and a reduction in completed homes, aligning supply with demand.
Q:What is the impact of warranty costs on gross margin?
A:Warranty costs provided a 20 basis point benefit in Q1 due to a settlement in the South Central region and lower overall warranty and litigation costs. Future quarters are expected to return to normal levels of 30 to 60 basis points.
Q:What is the company's use of ARMs and rate buydowns?
A:The use of ARMs is in the low single digits, while temporary rate buydowns increased to low double digits in Q1. The company primarily offers 30-year fixed-rate mortgages.
Q:How is the company addressing affordability challenges?
A:The company is introducing smaller homes and focusing on higher density where municipal regulations allow. It aims to meet monthly payment needs, especially for first-time homebuyers.
Q:What is the performance of the first-time homebuyer segment compared to others?
A:The first-time homebuyer segment, which accounts for about two-thirds of the business, is performing similarly to other segments. Move-up buyers are less sensitive to interest rates but show no significant trend differences.
Q:What is the company's growth strategy and outlook for 2026?
A:The company expects to grow in 2026, leveraging increased community counts and market presence. It will focus on maximizing returns community by community and market by market.
Q:What is the company's response to FHFA comments on share repurchases?
A:The company maintains a balanced approach, focusing on starts and providing affordable housing while returning money to shareholders. It reiterated its $2.5 billion share repurchase guidance for the year.
Q:What is the company's view on policy changes to improve housing affordability?
A:The company supports policies that address affordability and believes it is well-positioned to benefit from any demand pickup, particularly for first-time homebuyers.
Q:What is the company's approach to managing inventory and starts?
A:The company has deliberately reduced spec inventory and improved cycle times to align with demand. It plans to increase starts in Q2 and maintains a balanced approach to inventory management.
Q:What is the company's view on the current market compared to a year ago?
A:The market today shows more balanced inventory compared to last year. The company is encouraged by traffic and demand trends and feels well-positioned for the spring selling season.
Q:What is the outlook for stick and brick costs?
A:Stick and brick costs were down 1% quarter-over-quarter in Q1 and are expected to be flat in Q2. The company sees opportunities for further cost reductions.
Q:What is the company's view on leveraging M&A for growth?
A:The company focuses on tuck-in acquisitions to expand capacity or enter new markets. It continues to evaluate opportunities that align with its growth strategy.
Q:What is the company's view on demand amid low job growth?
A:The company believes pent-up demand, especially among first-time homebuyers, is driving activity despite low job growth. Long-term job growth is seen as essential for sustained housing demand.
Q:What is the company's strategy if mortgage rates move lower?
A:The company will balance driving additional demand with improving margins, depending on community-specific conditions. It may lower rates further if needed to spur demand.
Q:What is the company's view on using 401(k) savings for down payments?
A:The company believes allowing 401(k) savings for down payments would help first-time homebuyers and improve housing demand.
Q:What is the company's guidance for rental revenue and home closings?
A:Home closings guidance excludes single-family rental, but consolidated revenue guidance includes rental revenue.
Q:What is the impact of tariffs on material costs?
A:The company has not experienced significant increases in material costs due to tariffs.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on SG&A as a percentage of revenues for the full year, stating they only guide one quarter out. They also did not provide detailed insights into specific markets with elevated inventory or the exact percentage of incentives at the end of Q1. Additionally, they did not elaborate on the potential impact of policy changes on the single-family rental business or provide a detailed breakdown of land cost trends.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Americans mortgage
Communications People
DR Horton
Head Investor
Horton Senior
Horton start
Officer Chief
People Head
Relations mute
Relations revenue
SGA expense
Senior VP
VP Communications
ability pace
acquisition revenue
benefit margin
closing home
closing homebuyers
condition day
count cash
creation sale
demand change
discipline end
discipline market
end closing
expense ratio
home property
home start
homebuyers product
increase SGA
level end
leverage home
margin majority
margin recovery
margin remainder
month cash
mortgage closing
position lot
price home
sale price
warranty
DHI Transcript
D.R. Horton, Inc. (DHI) Q1 2026 Earnings Call Transcript
Positive1-20
The earnings call highlights strong demand, strategic cost management, and positive market outlook, particularly for first-time homebuyers. The company maintains a balanced approach to inventory and starts, with plans to increase share repurchases. Despite some uncertainties, such as SG&A guidance, the optimistic guidance and strategic focus on affordability and community expansion suggest a positive stock price movement.
D.R. Horton, Inc. (DHI) Q4 2025 Earnings Call Transcript
Unknown10-28
The earnings call summary presents a mixed outlook. While there are positive indicators like strong order growth in certain regions and a significant share repurchase plan, concerns exist over elevated sales incentives, sticky lot costs, and reduced gross margins. The Q&A reveals management's strategic flexibility and confidence but highlights uncertainties in market conditions and costs. The lack of specific guidance on gross margins and incentives adds to the neutral sentiment. Given the absence of market cap data, a neutral prediction is appropriate, balancing positive long-term housing market outlook against current economic volatility.
D.R. Horton, Inc. (DHI) Q3 2025 Earnings Call Transcript
Unknown7-22
The earnings call presented a mixed outlook. While financial metrics like homebuilding return and share repurchase plans are positive, concerns include increased incentives affecting margins, and unclear responses on cost impacts. The Q&A highlighted uncertainties in geographic demand and costs. With stable rental revenues but declining margins, the sentiment is balanced. The absence of market cap data suggests a cautious approach, leading to a neutral prediction for stock movement.
D.R. Horton, Inc. (NYSE:DHI) Q2 2025 Earnings Call Transcript
Unknown4-18
The earnings call presents mixed signals. While there are positive aspects like strong shareholder returns and a significant share repurchase plan, financial metrics such as EPS and revenue have declined year-over-year. The guidance for revenue is optimistic but offset by increased SG&A expenses and a decline in gross profit margins. The Q&A session did not reveal any major new risks or positive catalysts. Given the lack of a strong positive or negative catalyst, the overall sentiment is neutral, suggesting a stock price movement within -2% to 2% over the next two weeks.
DHI Slides
DHI Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
