D.R. Horton’s first quarter saw a 2.7% positive market reaction despite revenue, non-GAAP profit, and adjusted EBITDA all falling short of Wall Street expectations. Management attributed the shortfall to a slower-than-anticipated spring selling season, marked by heightened affordability challenges and declining consumer confidence. CEO Paul Romanowski pointed to increased buyer caution, particularly among first-time homebuyers, as a key reason for the 15% drop in net sales orders. The company responded by raising sales incentives to maintain sales momentum, keeping cancellation rates at the lower end of historical norms. Romanowski remarked that while demand was softer, “our weekly sales in March and to-date in April have outpaced our February rate,” suggesting some stabilization late in the quarter.
Is now the time to buy DHI? Find out in our full research report (it’s free).
D.R. Horton (DHI) Q1 CY2025 Highlights:
- Revenue: $7.73 billion vs analyst estimates of $8.04 billion (15.1% year-on-year decline, 3.9% miss)
- Adjusted EPS: $2.58 vs analyst expectations of $2.70 (4.5% miss)
- Adjusted EBITDA: $1.03 billion vs analyst estimates of $1.17 billion (13.3% margin, 12.2% miss)
- The company dropped its revenue guidance for the full year to $34.05 billion at the midpoint from $36.75 billion, a 7.3% decrease
- Operating Margin: 12.9%, down from 15.9% in the same quarter last year
- Backlog: $5.48 billion at quarter end, down 22.2% year on year
- Market Capitalization: $40.52 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 D.R. Horton’s Q1 Earnings Call
- Stephen Kim (Evercore ISI) asked how management’s focus has shifted from maximizing volume to prioritizing returns and cash flow. CEO Paul Romanowski explained that the company now balances pace and price to drive consistent operating cash flows and shareholder returns.
- John Lovallo (UBS) inquired about the sustainability of gross margins amid rising incentive costs. COO Michael Murray noted that if incentives remain flat, margins could reach the higher end of guidance, but rate volatility makes predictions challenging.
- Alan Ratner (Zelman & Associates) asked about the company’s reduced start pace and its implications for future growth. Romanowski stated that improved cycle times allow for lower inventory levels and that starts are expected to accelerate if market conditions improve.
- Carl Reichardt (BTIG) questioned differences in performance between entry-level and move-up communities. Management highlighted continued strong demand from first-time buyers and stable pricing, with incentives focused more on rate buydowns than direct price cuts.
- Rafe Jadrosich (Bank of America) sought clarity on land cost trends and potential relief amid softer demand. CFO Bill Wheat responded that land costs rose 10% year over year with no significant pullback expected, as finished lot supply remains constrained.
Catalysts in Upcoming Quarters
Looking ahead, our team is focused on (1) the pace of sales recovery as incentives remain elevated, (2) the company’s ability to manage inventory and community count in response to local demand signals, and (3) the evolution of land and material cost inflation, particularly as potential tariffs and supply chain pressures develop. Ongoing execution on capital returns and gross margin management will also be closely monitored.
D.R. Horton currently trades at $132.12, up from $117.62 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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