D.R. Horton outlines $33.5B–$35B revenue target for 2026 as company focuses on inventory efficiency and market share

Earnings Call Insights: D.R. Horton (DHI) Q4 2025

MANAGEMENT VIEW

* CEO Paul Romanowski reported, "This year, the D.R. Horton team had the privilege of providing homeownership to nearly 85,000 individuals and families, including approximately 43,000 first-time homebuyers." He added that homebuilding and rental operations provided more than 91,200 households a place to call home during fiscal 2025.
* Romanowski highlighted a 5% increase in net sales orders for the quarter, emphasizing disciplined management of pace, price, and incentives to meet demand. "The D.R. Horton team produced solid fourth quarter results to finish the year, highlighted by consolidated pretax income of $1.2 billion on revenues of $9.7 billion, with a pretax profit margin of 12.4%."
* The company generated $3.4 billion in operating cash flow after $8.5 billion in homebuilding investments, returning $4.8 billion to shareholders through repurchases and dividends.
* COO Michael Murray stated, "Net income for the quarter was $905.3 million or $3.04 per diluted share on consolidated revenues of $9.7 billion. For the year, net income was $3.6 billion or $11.57 per diluted share on revenues of $34.3 billion."
* CFO Bill Wheat noted, "Our net sales orders in the fourth quarter increased 5% from the prior year quarter to 20,078 homes and order value increased 3% to $7.3 billion."
* Vice President Jessica Hansen reported, "Our gross profit margin on home sales revenues in the fourth quarter was 20%, down 180 basis points sequentially from the June quarter. 110 basis points of the decrease in our gross margin from June to September was due to higher incentive costs on homes closed during the quarter and 60 basis points of the decrease was from higher-than-normal litigation costs."
* The company ended the year with 29,600 homes in inventory, down 21% from a year ago, and expects to increase its sales pace in the first half of fiscal 2026.
* Romanowski described the acquisition of SK Builders in South Carolina, stating it provided inventory and control of additional lots to enhance market positioning.

OUTLOOK

* Hansen guided for fiscal 2026 consolidated revenues of approximately $33.5 billion to $35 billion and homes closed in the range of 86,000 to 88,000. "We expect to generate at least $3 billion of cash flow from operations in fiscal 2026."
* For Q1 2026, the company expects consolidated revenues between $6.3 billion and $6.8 billion, homes closed between 17,100 and 17,600, a home sales gross margin of 20% to 20.5%, and a consolidated pretax profit margin of 11.3% to 11.8%.
* Incentive levels are expected to remain elevated, with margins for the full year dependent on demand strength, mortgage rate changes, and market conditions.
* The company plans to repurchase approximately $2.5 billion of common stock and pay around $500 million in dividends in fiscal 2026.

FINANCIAL RESULTS

* Home sales revenues for Q4 were $8.5 billion on 23,368 homes closed. The average closing sales price was $365,600, down 1% sequentially and 3% year-over-year.
* Gross profit margin on home sales revenues was 20%, down from 21.8% in the previous quarter, attributed to higher incentives and litigation costs.
* Rental operations generated $81 million of pretax income on $805 million of revenues in Q4.
* Forestar, D.R. Horton’s lot development company, delivered $671 million in revenues and $113 million in pretax income for Q4.
* The company ended the quarter with $6.6 billion in consolidated liquidity and a consolidated leverage of 19.8%.

Q&A

* John Lovallo, UBS: Asked about gross margin walk and the persistence of litigation costs. Wheat replied, "The 60 basis points unusual impact from litigation this quarter is not expected to persist into Q1."
* Stephen Kim, Evercore ISI: Inquired about consolidated pretax outlook and cash flow conversion. Hansen explained, "We would expect rental to be a little bit softer quarter... and then we'll just have less leverage on SG&A from the lower closings volume." Wheat confirmed expectations for consistent cash flow conversion.
* Richard Reid, Wells Fargo: Questioned the sequential rise in incentives and breakdown of discounting versus rate buydowns. Hansen shared, "We did expect to lean in more heavily to the offering of 3.99%. ...about 73% of our total closings in Q4, which was up from 72% sequentially, received a rate buydown."
* Alan Ratner, Zelman & Associates: Asked if the slight closing guide increase for 2026 indicated optimism. Romanowski said, "We are absolutely in position to deliver on the units in the guide... It's going to depend on the spring selling season and the strength of the market."
* Matthew Bouley, Barclays: Asked about the balance between growth and gross margin. Murray stated, "You cannot continue to run the machine to a 0 profit margin."

SENTIMENT ANALYSIS

* Analysts pressed on incentives, gross margin sustainability, and regional demand softness, showing a slightly negative to neutral tone with persistent questions about market risks and cost pressures.
* Management maintained a confident but measured tone in prepared remarks, with Romanowski repeatedly noting the company’s operational flexibility and disciplined approach. During Q&A, the tone shifted to more caution and acknowledgment of challenges, exemplified by Wheat’s response: "What it took in order to get the sales for the closings that needed... ended up being a little bit more than what we anticipated."
* Relative to the previous quarter, both analysts and management exhibited increased caution, especially regarding cost pressures and market uncertainty.

QUARTER-OVER-QUARTER COMPARISON

* Gross profit margin on home sales declined to 20% from 21.8% in Q3, with management attributing the drop to elevated incentives and litigation costs.
* Net sales orders grew 5% year-over-year in Q4, while the previous quarter saw flat orders.
* Inventory levels were reduced significantly, from 38,400 homes at the end of Q3 to 29,600 at year-end.
* The outlook for 2026 includes slightly higher guidance for homes closed compared to previous full-year guidance.
* Management tone shifted from optimistic in Q3 to more guarded in Q4, emphasizing caution amid ongoing affordability constraints and variable consumer sentiment.

RISKS AND CONCERNS

* Ongoing affordability constraints and cautious consumer sentiment are expected to persist.
* Gross margin headwinds from elevated incentive costs and litigation expenses were highlighted.
* Lot costs are anticipated to remain sticky, with potential for only modest relief.
* Regional markets such as Texas and Florida described as choppy or challenged, with some areas still working through elevated inventory.
* Analysts expressed concern about the sustainability of margins and the impact of incentive strategies, as well as the potential for ASP pressure and cost inflation.

FINAL TAKEAWAY

D.R. Horton's management emphasized the company's ability to navigate market volatility with disciplined inventory management, a focus on affordability, and operational flexibility. The 2026 guidance reflects a cautious optimism, supported by a strong liquidity position, planned capital returns to shareholders, and ongoing cost efficiency initiatives, while acknowledging persistent affordability challenges and gross margin pressures that will require continued responsiveness to market conditions.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/dhi/earnings/transcripts]

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* D.R. Horton, Inc. (DHI) Q4 2025 Earnings Call Transcript [https://seekingalpha.com/article/4834048-d-r-horton-inc-dhi-q4-2025-earnings-call-transcript]
* D.R. Horton, Inc. 2025 Q4 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4834168-d-r-horton-inc-2025-q4-results-earnings-call-presentation]
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