D.R. Horton Q2 Earnings Call Highlights

Key Points

• D.R. Horton reported Q2 fiscal 2026 consolidated pre-tax income of $867 million on $7.6 billion revenue (11.5% pre-tax margin) and GAAP EPS of $2.24, while net sales orders rose 11% year‑over‑year to 24,992 homes and completed unsold homes fell ~35% YoY.
• The company’s home sales gross margin was 20.1% (≈19.7% normalized) with incentives around 10% of revenue, and management tied near‑term margin outlook to demand and mortgage rate conditions.
• D.R. Horton ended the quarter with $6.0 billion liquidity, repurchased 6 million shares for $904 million in the quarter and returned about $4.0 billion to shareholders over the past 12 months, while updating fiscal‑2026 guidance to ~$33.5–34.5 billion revenue and 86,000–87,500 home closings.

D.R. Horton NYSE: DHI reported fiscal second-quarter 2026 results that management characterized as solid despite what executives said remains a challenging demand backdrop driven by affordability constraints and cautious consumer sentiment.

President and CEO Paul Romanowski said the company generated consolidated pre-tax income of $867 million on $7.6 billion of revenue, producing an 11.5% pre-tax profit margin that came in above the high end of its guidance range. Romanowski also said net sales orders rose 11% year-over-year, while the company reduced unsold completed homes by 35% from a year earlier as it balanced “sales pace, pricing, and incentives” to drive sales while “maximizing returns.”

Quarterly results and homebuilding metrics

Chief Operating Officer Mike Murray said earnings were $2.24 per diluted share, down from $2.58 a year earlier. Net income totaled $648 million on $7.6 billion of consolidated revenue.

Home sales revenue was $7.0 billion on 19,486 homes closed, compared with $7.2 billion on 19,276 closings in the prior-year quarter. Murray said the average closing price was $361,600, down 1% sequentially and down 3% year-over-year, and emphasized the company’s affordability positioning. He said D.R. Horton’s average closed-home price is roughly $160,000 below the U.S. average new-home price, and that its median home price is about $70,000 below the median price of an existing home.

Chief Financial Officer Bill Wheat said net sales orders increased 11% to 24,992 homes and total order value rose 10% to $9.2 billion. The cancellation rate was 16%, unchanged from a year earlier and down from 18% sequentially. Wheat also said the average number of active selling communities increased 4% sequentially and 11% year-over-year, while the average net order price was $366,300, up 1% sequentially and down 2% from the prior-year quarter.

Margins, incentives, and cost trends

Senior Vice President of Communications Jessica Hansen said the home sales gross margin was 20.1%, including a 40-basis-point benefit from a favorable litigation outcome and lower-than-normal warranty costs. She said that on a normalized basis, home sales gross margin would have been 19.7%, “slightly higher than our guidance range.”

On a per-square-foot basis, Hansen said home sales revenue and “stick and brick” costs were both down 2% sequentially, while lot costs were essentially flat. Year-over-year, home sales revenue and stick and brick costs were down 4% per square foot, while lot costs were up 4%.

Looking ahead, Hansen said the company expects home sales gross margin of 19.7% or slightly higher in the third quarter, citing anticipated construction cost savings on homes closed. Executives repeatedly tied the outlook for incentives and margins to demand and mortgage rate conditions.

In the Q&A session, management said it has been working with trade partners to reduce costs after moderating starts in prior quarters, and that those lower costs are beginning to show up in homes under construction. The company said it expects incremental cost benefits in the third and fourth quarters. On potential inflation tied to higher oil prices and possible fuel surcharges, executives said they were monitoring conditions but had “nothing tangible to report” and suggested any impact would depend on the duration of elevated oil prices.

Management also provided detail on incentives and mortgage products. Executives said incentives as a percentage of revenues were roughly 10%. The company said about 10% of closings through its mortgage company used adjustable-rate mortgages (ARMs), down from 13% sequentially but up from essentially zero a year ago. Executives also said 90% of buyers using D.R. Horton’s mortgage company received some form of permanent and/or temporary buydown during the quarter, and that roughly 73% of overall closings had some form of buydown.

Inventory, starts, and lot strategy

Romanowski said D.R. Horton started 27,500 homes in the quarter and ended with 38,200 homes in inventory, including 22,900 unsold homes and 5,500 completed and unsold homes. He said completed unsold homes were down 25% from December and 35% from a year earlier, and that completed unsold inventory was at its lowest level since fiscal 2023. Romanowski also said median cycle time from start to close improved by nearly a month year-over-year, helping the company hold less inventory and turn homes more efficiently. The company expects third-quarter starts to be lower than the second quarter.

Murray said the company’s lot position at March 31 totaled about 575,000 lots, with 23% owned and 77% controlled through purchase contracts. He said D.R. Horton remains focused on working with land developers and building on lots developed by others to enhance capital efficiency and flexibility; 67% of homes closed in the quarter were on lots developed by Forestar or third parties, up from 64% a year earlier. The company’s homebuilding investments in lots, land, and development totaled $2.1 billion during the quarter, including $1.5 billion for finished lots, $500 million for land development, and $120 million for land acquisition.

In response to analyst questions, management said the company has “mid-single-digit” exposure to lot bankers within its lot portfolio and emphasized its ability to adjust lot takedown schedules with third-party developers. Executives also said they feel “as good as we’ve ever been” about the land pipeline and indicated the company can pass on deals that do not meet underwriting standards in the current incentive environment.

Other segments, capital returns, and updated outlook

Romanowski said rental operations generated $12 million of pre-tax income on $212 million of revenue from the sale of 566 single-family rental homes and 216 multifamily rental units. Rental property inventory totaled $3 billion at March 31, including $2.7 billion of multifamily and $347 million of single-family rental properties, and management said it expects rental inventory to remain around $3 billion.

Financial services produced pre-tax income of $52 million on $193 million of revenue, a 26.8% pre-tax profit margin. Murray said Forestar, the company’s majority-owned lot development business, reported $374 million of revenue on 2,938 lots sold with pre-tax income of $44 million. Forestar’s owned and controlled lot position totaled 94,000 lots at March 31, with 65% of owned lots under contract with or subject to a right of first offer to D.R. Horton.

On capital allocation, Wheat said the company generated $3.7 billion of operating cash flow over the past 12 months and returned $4.0 billion to shareholders through repurchases and dividends. In the first six months of fiscal 2026, homebuilding cash provided by operations was $619 million and consolidated operating cash flow was $442 million. During the second quarter, the company repurchased 6 million shares for $904 million and paid dividends of $0.45 per share totaling $130 million; the board declared another $0.45 quarterly dividend to be paid in May. At quarter-end, D.R. Horton reported $6.0 billion of liquidity, including $1.9 billion of cash and $4.1 billion of credit capacity, with total debt of $6.6 billion and $600 million of homebuilding senior notes maturing over the next 12 months.

Hansen said third-quarter consolidated revenue is expected in a range of $8.8 billion to $9.3 billion, with homebuilding closings of 23,500 to 24,000 homes. The company expects third-quarter home sales gross margin of 19.7% to 20.2% and a consolidated pre-tax margin of 12.2% to 12.7%.

For fiscal 2026, Hansen said the company now expects consolidated revenue of about $33.5 billion to $34.5 billion and homebuilding closings of 86,000 to 87,500 homes. Management reiterated expectations for an income tax rate of about 24.5%, operating cash flow of at least $3 billion, share repurchases of about $2.5 billion, and dividends of around $500 million. In the Q&A, executives said the top end of revenue guidance was reduced due to being light on closings guidance in the first half and seeing a lower-than-anticipated average sales price, with the company not assuming ASP increases in the back half.

Romanowski said the company will continue adjusting to market conditions “with discipline” amid broader economic volatility and uncertainty, while focusing on affordability, market share, cash flow generation, and returning capital to shareholders.

About D.R. Horton NYSE: DHI

D.R. Horton, Inc is a national homebuilding company that designs, constructs and sells new residential properties across the United States. The company's core operations focus on building single-family detached homes, townhomes and condominiums for a range of buyer segments. In addition to home construction and sales, D.R. Horton provides complementary services through subsidiaries that support the mortgage, title and closing processes for its customers, enabling integrated transaction workflows from inventory development to home delivery.

Founded in 1978 by Donald R.

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