D.R. Horton (DHI) Up 6.6% Since Last Earnings Report: Can It Continue?

D.R. Horton's Q3 Earnings Beat on Higher Closings

D.R. Horton reported third-quarter fiscal 2026 earnings of $3.20 per share, beating the Zacks Consensus Estimate of $2.99 by 7%. Revenues of $9.23 billion also surpassed the consensus mark of $9.19 billion by 0.5%. On a year-over-year basis, earnings declined 4.8%, while revenues increased marginally.

The earnings and revenue beat were driven by higher home-closing volumes, resilient home sales margins, disciplined management of pricing and incentives, contributions from the Rental, Forestar and Financial Services businesses and the benefit of a lower diluted share count from share repurchases. However, lower profitability, elevated incentives and cautious consumer demand continued to weigh on results.

DHI Sustains Revenue as Profitability Moderates

Consolidated revenues totaled $9.227 billion compared with $9.225 billion in the prior-year quarter. Income before taxes declined 9.7% year over year to $1.23 billion, while the pre-tax margin contracted to 13.3% from 14.7%.

Net income fell 11.7% to $904.9 million from a year ago. Cost of sales increased to $7.08 billion from $7.02 billion, while selling, general and administrative expenses rose 5% to $991.2 million.

The lower earnings reflected margin pressure rather than a meaningful decline in consolidated revenues. Management continued to balance sales pace, pricing, incentives and inventory levels across its communities.

D.R. Horton's Home Closings Support Sales

Homebuilding revenues increased 1.2% year over year to $8.69 billion. Homes closed rose 4% year over year to 23,983, reaching the high end of management’s guidance range for the quarter.

Homebuilding pre-tax income declined 10.1% to $1.07 billion, while the segment’s pre-tax margin narrowed to 12.3% from 13.8%. The results show that higher delivery volume was not enough to offset the effect of weaker profitability.

Net sales orders totaled 23,084 homes, nearly unchanged from the prior-year quarter level of 23,071 units. The value of orders was $8.44 billion, also broadly stable year over year.

DHI Faces Higher Cancellations and Margin Pressure

The cancellation rate increased to 20% from 17% in the year-ago period. Management said that affordability constraints and cautious consumer sentiment continued to affect new-home demand.

Home sales revenues increased to $8.68 billion from $8.56 billion. The home sales gross margin fell to 20.7% from 21.8%, though it improved from 20.1% in the second quarter of fiscal 2026.

Gross margin before interest and other costs was 24.7%, down from 25.7% a year earlier. Management expects sales incentives to remain elevated in the fiscal fourth quarter, with incentive levels depending on demand, mortgage rates and broader market conditions.

D.R. Horton Maintains Flexible Inventory Position

The company ended the quarter with 38,000 homes in inventory, including 23,300 unsold homes. Completed unsold homes totaled 7,600, of which 600 had been completed for more than six months.

During the first nine months of fiscal 2026, 67% of homes closed were built on lots developed by Forestar or third parties, up from 65% a year ago. This structure supports D.R. Horton’s effort to maintain flexibility in its land and lot investments.

Homebuilding return on inventory declined to 17% for the trailing 12 months from 22.1% a year earlier. The decrease reflected lower trailing homebuilding pre-tax income against a relatively stable average inventory base.

DHI's Other Segments Contribute to Results

Rental operations generated revenues of $266.1 million (down 30.1% from a year ago) from the sale of 601 single-family rental homes and 339 multifamily rental units. The segment posted pre-tax income of $31 million (down 43.4% year over year) and a pre-tax margin of 11.6% (contracted from 14.4%).

Forestar sold 3,659 lots and generated revenues of $407 million (up 4.2% from a year ago). Pre-tax income was $48.7 million (up 11.7% year over year), resulting in a margin of 12% from 11.2% a year ago.

Financial Services recorded revenues of $220.7 million (down 3.1% year over year) and pre-tax income of $70.3 million (down 13.5%). The segment’s pre-tax margin was down to 31.9% from 35.7% a year ago, yet making it the company’s most profitable business by margin during the quarter.

DHI Returned Capital While Preserving Liquidity

D.R. Horton continued to return cash to shareholders during the quarter. The company repurchased 4.2 million shares for $615.7 million and paid $127.1 million in cash dividends. Common shares outstanding totaled 280.7 million as of June 30, 2026, down 6% year over year, while the remaining repurchase authorization was $1.1 billion.

Cash, cash equivalents and restricted cash totaled $2.13 billion at quarter-end compared with $3.03 billion at the end of fiscal 2025. Total liquidity remained solid at $6.1 billion, while the debt-to-total-capital ratio was 23%. The company also had $600 million of homebuilding senior notes maturing within the next 12 months. The board declared a quarterly dividend of 45 cents per share.

Cash provided by operations was $880.8 million for the first nine months of fiscal 2026 compared with $949.1 million a year ago. Trailing 12-month return on equity was 12.8%, while return on assets was 8.5%, reflecting continued profitability despite lower year-over-year earnings.

D.R. Horton Trims Fiscal 2026 Guidance

D.R. Horton now expects fiscal 2026 consolidated revenues of $32.5-$33 billion, down from $33.5-$34.5 billion expected earlier. This compares with $34.25 billion in fiscal 2025.

Homebuilding closings are projected to be between 83,800 and 84,300 homes (versus earlier projection of 86,000-87,500 homes). This compares with 84,863 in fiscal 2025.

Income tax rate is expected to be approximately 25%.

The company reiterated its expectations for at least $3 billion in operating cash flow, approximately $2.5 billion in share repurchases and about $500 million in dividend payments.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -8.08% due to these changes.

VGM Scores

Currently, D.R. Horton has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has a grade of B on the value side, putting it in the top 40% for value investors.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, D.R. Horton has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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