D.R. Horton Q4 Profit Falls as Margins Narrow; FY2027 Outlook Set

D.R. Horton (NYSE: DHI) reported lower fiscal fourth-quarter earnings as narrower home sales margins, higher selling, general and administrative expenses, and rental-segment impairments weighed on profitability. The homebuilder also outlined fiscal 2027 expectations that account for continued volatility in mortgage rates and economic conditions.

Net income attributable to D.R. Horton fell to $741.8 million in the quarter ended September 30, 2026, from $905.3 million a year earlier. Diluted earnings per share declined to $2.67 from $3.04. Consolidated pre-tax income was $1.01 billion on revenue of $9.37 billion, with the pre-tax profit margin contracting to 10.8% from 12.4%.

Homebuilding margins narrow

Home sales revenue decreased to $8.38 billion from $8.54 billion as homebuilding closings slipped to 22,915 from 23,368. The home sales gross margin was 19.5%, compared with 20.0% in the prior-year quarter and 20.7% in the preceding quarter. D.R. Horton said mortgage-rate swings and elevated incentives were the main sources of recent gross-margin volatility, while above-normal litigation costs reduced the fourth-quarter margin by about 30 basis points.

Homebuilding pre-tax income fell to $891.0 million from $1.00 billion. Quarterly homebuilding SG&A expense increased to $729.3 million from $678.5 million and rose to 8.7% of homebuilding revenue from 7.9%. The company said fiscal 2026 expenses included higher advertising spending and technology investments as it maintained infrastructure to support new markets and community-count growth.

The rental segment recorded a fourth-quarter pre-tax loss of $25.3 million. Forestar contributed $78.6 million of pre-tax income, while financial services generated $78.2 million. The presentation attributed the overall decline in consolidated pre-tax margin primarily to rental impairments, higher SG&A expenses and the lower home sales gross margin.

For the full fiscal year, D.R. Horton generated $33.04 billion in consolidated revenue and $3.91 billion in pre-tax income, producing an 11.8% pre-tax margin. Net income attributable to the company was $2.89 billion, or $10.11 per diluted share, compared with $3.59 billion, or $11.57 per share, in fiscal 2025.

Fiscal 2026 home sales revenue declined to $30.62 billion from $31.43 billion, while homebuilding closings decreased to 84,202 from 84,863. The full-year home sales gross margin narrowed to 20.2% from 21.5%, and homebuilding pre-tax income fell to $3.42 billion from $4.13 billion.

Fiscal 2027 expectations and capital returns

Based on market conditions at the time of its October 29 conference call, D.R. Horton expects fiscal 2027 consolidated revenue of $30.0 billion to $32.0 billion and between 79,000 and 84,000 home closings. The company projects consolidated cash flow from operations of approximately $3.5 billion.

For the first quarter of fiscal 2027, management expects revenue of $5.9 billion to $6.4 billion, home closings of 15,500 to 16,500, a home sales gross margin of 18.0% to 18.5%, and a consolidated pre-tax margin of 7.0% to 8.0%. The projected income tax rate is approximately 25.5% for both the quarter and full year.

The company plans to repurchase about $3.0 billion of common stock and pay approximately $500 million in dividends during fiscal 2027. It returned $4.1 billion to shareholders in fiscal 2026, consisting of $3.6 billion in repurchases and $513.3 million in dividends. Repurchases reduced the outstanding share count by 8% from a year earlier. D.R. Horton also increased its fiscal 2027 annual dividend by 11% to $2.00 per share.

Operating cash flow totaled $3.5 billion in fiscal 2026. At year-end, consolidated liquidity stood at $7.2 billion and consolidated leverage was 20.8%, compared with 19.8% a year earlier. The company targets consolidated leverage of approximately 20%.

D.R. Horton ended the year with 570,600 owned and controlled lots, including 440,100 controlled lots and 130,500 owned lots. It said the use of purchase contracts and finished lots is intended to preserve capital flexibility. Homes in inventory excluding models declined to 28,200 from 29,600 a year earlier, while housing inventory turns increased to 2.9 times from 2.8 times.

Forestar, the residential lot developer in which D.R. Horton owns a 62% interest, sold 13,545 lots and generated $1.64 billion of revenue in fiscal 2026. Forestar expects to sell 12,000 to 13,000 lots and generate $1.4 billion to $1.5 billion of revenue in fiscal 2027, based on current market conditions.

D.R. Horton cautioned that mortgage-rate volatility and changing economic conditions could materially affect its outlook. Other disclosed risks include the cyclical nature of housing and rental markets, access to mortgage and capital-market financing, inflation and higher interest rates, land and inventory exposure, construction labor and material availability, regulatory approvals, competition, weather events, warranty and construction-defect claims, and cybersecurity incidents.