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D.R. Horton to Report Q3 Earnings: Buy, Sell or Hold the Stock?

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Key Takeaways

  • DHI expects Q3 revenues of $8.4B-$8.9B, down from $9.97B a year ago due to weak closings and soft demand.
  • DHI's Q3 EPS estimate of $2.93 signals a 28.5% drop from $4.10 a year ago on lower revenue and demand.
  • Home closings are projected at 22,000-22,500 units, down from 24,155 a year ago due to affordability issues.

D.R. Horton Inc. (DHI - Free Report) is slated to report results for the third quarter of fiscal 2025 (ended June 30, 2025) on July 22, before the opening bell.

In the last reported quarter that ended March 31, 2025, D.R. Horton reported dismal results, with earnings and total revenues missing the Zacks Consensus Estimate and decreasing on a year-over-year basis amid ongoing affordability pressures and consumer uncertainty. The company posted earnings of $2.58 per share, down from $3.52 a year ago, and net income of $810 million on $7.7 billion in revenues. Home sales revenues declined 15% to $7.18 billion on 19,276 closings, with the average selling price of delivered homes down 1% year over year and sequentially to $372,500. Net sales orders also fell 15% year over year to 22,437 homes, and the order value declined 17% to $8.4 billion.

Markedly, D.R. Horton reported better-than-expected earnings in two of the trailing four quarters and missed on two occasions, the average surprise being 1.7%.

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How Are Estimates Placed for D.R. Horton Stock?

The Zacks Consensus Estimate for the quarter’s earnings per share (EPS) has remained unchanged at $2.93 over the past 60 days. The estimated figure indicates a decline of 28.5% from the year-ago EPS of $4.10. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

The consensus mark for revenues is pegged at $8.81 billion, indicating an 11.6% year-over-year decline.

For fiscal 2025, DHI is expected to register a 19.9% EPS decline on a 7.4% revenue decrease from a year ago.

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Factors Likely to Influence D.R.Horton’s Q3 Results

Revenues: Soft demand, elevated inventories and margin headwinds are expected to weigh on D.R. Horton’s fiscal third-quarter results. The spring 2025 selling season for the U.S. homebuilding market proved softer than anticipated, reflecting persistent affordability challenges and declining consumer confidence. Elevated and volatile mortgage rates, coupled with economic and geopolitical uncertainty, dampened buyer sentiment during what is typically the industry's peak sales period. While some builders, like KB Home (KBH - Free Report) , initially saw a boost in March from strategic pricing adjustments, that momentum faded in April and May as demand weakened across many regions. Homebuilder peers like Lennar (LEN - Free Report) and KB Home have also flagged weakening consumer demand in their quarterly releases. Lennar's quarterly results reflect ongoing pressure on margins and earnings amid a soft housing demand due to affordability concerns lingering in the market. Both Lennar and KB Home highlighted that homebuyers are taking longer to finalize purchases, impacting net sales.

The company anticipates the quarter’s total revenues to be between $8.4 billion and $8.9 billion compared with $9.97 billion reported a year ago.

Under the Homebuilding segment (which contributed 93.1% of second-quarter fiscal 2025 total revenues), revenues are expected to have declined due to a decrease in homes closed, given the still-high mortgage rates circulating the housing market and the uncertainties regarding the new tariffs. Due to the suppressed market scenario and lingering inflation, the expectations of further rate cuts have also been paused for the time being, marring growth prospects. The company expects total homes closed to be between 22,000 and 22,500 units in the fiscal third quarter, down from 24,155 home closures made in the year-ago quarter.

Our model predicts Homebuilding revenues to decline 6.7% year over year to $6.56 billion. We also expect home closures to be 22,315 units, down 7.6% year over year. We expect Rental Property (which contributed 3.1% of second-quarter fiscal 2025 total revenues) revenues to be $343.6 million, which implies a 16.9% drop from the year-ago level.

On the other hand, our model predicts Forestar (which contributed 4.5% of second-quarter fiscal 2025 total revenues) revenues to be $323.2 million, which indicates 1.5% growth from the year-ago level. We expect the Financial Services segment’s (which contributed 2.8% of second-quarter fiscal 2025 total revenues) revenues to be $221 million, which calls for a decline of 8.8% from the year-ago level.

Margins: A persisting inflationary environment, along with concerns for labor and material supply amid tariff discussions, is expected to have pushed down the fiscal third-quarter margins. Also, costs associated with the expansion of DHI’s operating platform and elevated expenses due to increased incentive offerings are likely to have added to the downtick. The company expects the home sales gross margin to be between 21% and 21.5%, down from 24% reported in the year-ago quarter. Our model predicts the metric to be about 21.2%, reflecting a 280 basis points (bps) year-over-year contraction, due to continued use of incentives and rising land costs.

We expect the quarter’s homebuilding SG&A, as a percentage of revenues, to be 7.9% compared with 7.1% reported a year ago.

Orders & Backlog: For the fiscal third quarter, our model predicts net sales orders to decline 3.9% year over year to 23,887 units. The same for the backlog is currently pegged at 15,737 units, which indicates a 6.3% decrease from the reported year-ago quarter. Our model predicts the value of the backlog to be $6.14 billion, implying a decline of 6.4% year over year.

What the Zacks Model Unveils for DHI

Our proven model does not conclusively predict an earnings beat for D.R. Horton this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here.

Earnings ESP: DHI has an Earnings ESP of -1.38%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

D.R. Horton Stock’s Price Performance & Valuation

D.R. Horton stock has gained 9% in the past three months and outperformed the Zacks Building Products - Home Builders industry but lagged the broader Construction sector and the Zacks S&P 500 Composite, as you can see below.
 

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Image Source: Zacks Investment Research

Let's assess the value DHI offers to investors at its current levels. DHI stock is trading slightly at a premium compared to the industry average, as shown in the chart below. The stock is trading at a forward 12-month P/E ratio of 11.01, higher than the industry average of 10.25 and well above its five-year median of 9.44.

D.R. Horton’s P/E Ratio (Forward 12-Month) vs. Industry

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Image Source: Zacks Investment Research

Why Should You Hold DHI Stock Now?

While D.R. Horton faces near-term headwinds — including affordability challenges, margin compression and demand softness — its long-term value proposition remains intact. The company continues to command market leadership in the homebuilding space, with a resilient operating model and disciplined capital deployment, even in a challenging macro backdrop. Despite expectations for a year-over-year decline in both earnings and revenues for the fiscal third quarter, these headwinds appear largely priced in, especially as DHI has already gained 9% over the past three months and outperformed its industry peers.

Importantly, DHI’s strong balance sheet, diversified segment mix, and ongoing efforts to adjust pricing and manage inventories provide a cushion against prolonged housing market volatility. With shares trading slightly above their historical valuation multiples, investors may be reluctant to add aggressively at current levels. However, holding the stock ahead of the earnings release offers upside optionality in case of improving order trends, stabilizing mortgage rates or a more constructive tone from management regarding the back half of fiscal 2025.

Given its solid fundamentals and potential for a rebound once macro pressures ease, investors would be prudent to hold DHI stock ahead of the upcoming fiscal third-quarter results to better gauge whether its longer-term earnings power remains on track.


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