D.R. Horton’s second quarter missed Wall Street’s revenue expectations and posted a year-over-year sales decline. Management attributed this to disciplined capital allocation, effective inventory reduction, and strong demand from first-time homebuyers. CEO Paul Romanowski highlighted that the company’s focus on affordable product offerings and operational efficiency allowed it to deliver a consolidated pretax profit margin above the high end of its guidance range, even as affordability constraints and consumer caution continued to weigh on the broader housing market. The company’s ability to reduce completed unsold homes by 35% year-over-year and sustain returns on equity and assets was emphasized as key to navigating the challenging environment.
Is now the time to buy DHI? Find out in our full research report (it’s free for active Edge members).
D.R. Horton (DHI) Q1 CY2026 Highlights:
- Revenue: $7.56 billion vs analyst estimates of $7.61 billion (2.3% year-on-year decline, 0.7% miss)
- Adjusted EPS: $2.24 vs analyst estimates of $2.12 (5.6% beat)
- Adjusted EBITDA: $828.1 million vs analyst estimates of $885.4 million (11% margin, 6.5% miss)
- The company dropped its revenue guidance for the full year to $34 billion at the midpoint from $34.25 billion, a 0.7% decrease
- Operating Margin: 10.6%, down from 12.9% in the same quarter last year
- Backlog: $6.42 billion at quarter end, up 16.8% year on year
- Market Capitalization: $45.18 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From D.R. Horton’s Q1 Earnings Call
- Alan Ratner (Zelman): Asked about the stability of gross margins in light of construction cost trends and potential inflation from higher oil prices. CFO Bill Wheat explained that cost reductions from trade negotiations are flowing through, but a sustained oil price surge could create headwinds.
- Stephen Kim (Evercore ISI): Questioned whether elevated sales incentives are becoming a permanent fixture and how ARMs and buydowns impact gross margins. CEO Paul Romanowski noted incentives are about 10% of revenue and will remain elevated until rates or demand improve, with limited margin impact from ARMs.
- Ryan Gilbert (BTIG): Inquired about the earlier sale of homes under construction and its effect on margins and inventory. SVP Jessica Hansen indicated improved cycle times allow for earlier sales, which typically carry higher margins compared to completed inventory sales.
- Buck Horne (Raymond James): Sought clarification on the reduction in full-year revenue guidance and its underlying drivers. Hansen attributed it to lighter-than-expected closings and average sales prices in the first half, prompting a lower top-end estimate despite strong order trends.
- Anthony Pettinari (Citi): Asked about labor cost trends and potential for ongoing reductions. Romanowski stated that abundant labor supply and competitive conditions have driven some cost savings, with further stick and brick efficiencies expected through the year.
Catalysts in Upcoming Quarters
Looking ahead, key factors to watch include whether D.R. Horton can maintain gross margin stability as construction and labor cost savings offset land inflation, the impact of elevated incentives and affordability measures on sales volume across key regions, and continued progress in reducing unsold inventory and improving cycle times. Execution on regional product strategies and management’s ability to adapt to changing mortgage rate environments will also be key factors to monitor.
D.R. Horton currently trades at $159.86, up from $153.34 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).
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