DR Horton (DHI) AI Stock Analysis

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DR Horton

(NYSE:DHI)

78Outperform

DR Horton shows a robust financial foundation with strong profitability and cash flow management. The earnings call provided a balanced view, emphasizing resilience despite market challenges. Technical indicators suggest short-term caution, and the valuation indicates potential undervaluation, contributing to a favorable overall score.

Positive Factors

Cash Management

D.R. Horton's net debt to cap stands at 10.4%, which is below its 4-year average, indicating effective management of cash balances and debt.

Shareholder Returns

Positively, DHI is returning cash through dividends (+33% in F4Q) & repurchases (guided +34% Y/Y to $2.4B results).

Negative Factors

Demand Challenges

Order volume missed expectations as demand continues to be negatively impacted by affordability.

Earnings Performance

D.R. Horton reported earnings below expectations, with weaker deliveries and higher SG&A offsetting better gross margin.

Margin Pressure

Higher incentives and SG&A pressure the margin outlook, with a decline in gross margin expected.

DR Horton (DHI) vs. S&P 500 (SPY)

Market Cap

$37.75B

Dividend Yield1.11%

Average Volume (3M)3.96M

Price to Earnings (P/E)8.5

Beta (1Y)0.80

Revenue Growth-4.71%

EPS Growth-10.19%

CountryUS

Employees14,766

SectorConsumer Cyclical

Sector Strength62

IndustryResidential Construction

Share Statistics

EPS (TTM)2.61

Shares Outstanding315,122,500

10 Day Avg. Volume4,555,924

30 Day Avg. Volume3,962,732

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.11

Price to Cash Flow (P/CF)15.70

P/FCF Ratio15.70

Enterprise Value/Market Cap1.27

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit5.01

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$140.70

Price Target Upside10.52% Upside

Rating ConsensusHold

Number of Analyst Covering10

DR Horton Business Overview & Revenue Model

Company DescriptionD.R. Horton, Inc. (DHI) is a prominent American home construction company, recognized as the largest homebuilder by volume in the United States. Founded in 1978 and headquartered in Arlington, Texas, the company operates primarily in the residential construction sector, offering a diverse range of homes under various brand names, including D.R. Horton, Emerald Homes, Express Homes, and Freedom Homes. The company's core products include single-family detached homes, townhomes, and condominiums, catering to various market segments from entry-level to luxury homebuyers.

How the Company Makes MoneyD.R. Horton makes money primarily through the construction and sale of residential homes across the United States. The company's key revenue streams include the sale of single-family homes, townhomes, and condominiums. These homes are sold under different brand names, each targeting specific customer segments, such as first-time homebuyers or luxury market clients. Revenue is generated when these homes are sold to customers, with the sales price being influenced by factors such as location, size, and market demand. Additionally, D.R. Horton benefits from economies of scale due to its large operational footprint and strong supplier relationships, which help in cost management and maintaining competitive pricing. The company may also generate ancillary income through financial services, offering mortgage financing and title services to its homebuyers, further contributing to its overall earnings.

DR Horton Financial Statement Overview

Summary

DR Horton maintains a strong financial position with excellent profitability and cash flow management. Despite a decline in revenue growth, the company exhibits stable leverage and efficient capital utilization. Maintaining growth momentum will be crucial moving forward.

Income Statement

Very Positive

DR Horton demonstrates strong profitability with a TTM Gross Profit Margin of 42.03% and a Net Profit Margin of 12.16%, indicating efficient cost management. However, the Revenue Growth Rate shows a decline of 4.05% from the previous year, which may signal potential challenges in maintaining growth momentum. The EBIT Margin of 31.79% and EBITDA Margin of 12.63% suggest robust operational efficiency.

Balance Sheet

Positive

The company's balance sheet is solid with a Debt-to-Equity Ratio of 0.26, reflecting low leverage and financial stability. The Return on Equity stands at 17.26%, showcasing effective use of equity. However, the Equity Ratio of 69.65% highlights a conservative capital structure, which, while stable, may limit growth potential.

Cash Flow

Very Positive

DR Horton shows strong cash flow management with a Free Cash Flow to Net Income Ratio of 0.65, indicating substantial cash generation relative to net income. The Free Cash Flow Growth Rate is 37.13%, reflecting improved operational efficiency. The Operating Cash Flow to Net Income Ratio of 0.67 further supports the company's effective cash flow management.

Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
Income Statement		Total Revenue
36.80B	35.46B	33.48B	27.77B	20.31B
	Gross Profit
9.54B	9.35B	10.50B	7.88B	4.94B
	EBIT
6.10B	6.42B	7.57B	5.32B	2.83B
	EBITDA
6.37B	6.19B	7.65B	5.40B	2.91B
	Net Income Common Stockholders
4.76B	4.75B	5.86B	4.18B	2.37B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
4.54B	3.87B	2.54B	3.21B	3.02B
	Total Assets
36.10B	32.58B	30.35B	24.02B	18.91B
	Total Debt
5.97B	5.09B	6.07B	5.41B	4.28B
	Net Debt
1.45B	1.22B	3.53B	2.20B	1.26B
	Total Liabilities
10.28B	9.44B	10.57B	8.80B	6.79B
	Stockholders Equity
25.31B	22.70B	19.40B	14.89B	11.84B
Cash Flow		Free Cash Flow
2.02B	4.16B	413.60M	267.00M	1.13B
	Operating Cash Flow
2.19B	4.30B	561.80M	534.40M	1.42B
	Investing Cash Flow
-190.60M	-310.20M	-414.90M	-252.20M	-166.10M
	Financing Cash Flow
-1.36B	-2.67B	-811.20M	-85.10M	270.60M

DR Horton Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price127.31

Price Trends

50DMA

126.19

Positive

100DMA

133.46

Negative

200DMA

155.68

Negative

Market Momentum

MACD

>-0.01

Negative

RSI

54.90

Neutral

STOCH

74.36

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DHI, the sentiment is Neutral. The current price of 127.31 is above the 20-day moving average (MA) of 122.62, above the 50-day MA of 126.19, and below the 200-day MA of 155.68, indicating a neutral trend. The MACD of >-0.01 indicates Negative momentum. The RSI at 54.90 is Neutral, neither overbought nor oversold. The STOCH value of 74.36 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for DHI.

DR Horton Risk Analysis

DR Horton disclosed 25 risk factors in its most recent earnings report. DR Horton reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

DR Horton Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DHI	78 Outperform	$37.75B	8.46	17.83%	1.11%	-4.71%	-10.19%
PHM	78 Outperform	$20.94B	7.37	25.52%	0.82%	8.86%	13.60%
TMHC	77 Outperform	$5.77B	6.68	15.97%	―	12.19%	23.15%
TOL	75 Outperform	$10.37B	7.18	20.38%	0.93%	5.86%	12.20%
NVR	74 Outperform	$20.89B	14.48	38.25%	―	9.55%	1.79%
LEN	67 Neutral	$28.89B	8.02	14.97%	1.85%	2.03%	-3.80%
Sector *	61 Neutral	$6.66B	11.71	2.96%	4.01%	2.64%	-20.91%

* Consumer Cyclical Sector Average

Performance Comparison

DHI

DR Horton

127.31

-22.89

-15.24%

LEN

Lennar

110.20

-42.30

-27.74%

NVR

7,124.00

-500.83

-6.57%

PHM

PulteGroup

104.46

-12.35

-10.57%

TOL

Toll Brothers

104.33

-22.40

-17.68%

TMHC

Taylor Morrison

58.90

0.28

0.48%

DR Horton Earnings Call Summary

Earnings Call Date:Apr 17, 2025

(Q2-2025)

% Change Since: 8.31%|

Next Earnings Date:Jul 17, 2025

Earnings Call Sentiment Neutral

The earnings call presented a balanced view with strong financial performance, improved operational efficiencies, and stable cancellation rates as highlights. However, challenges such as decreased sales and order values, increased SG&A expenses, and lower gross profit margins were notable lowlights. The company's strategic focus on cash flow and shareholder returns indicates resilience in a challenging market environment.

Q2-2025 Updates

Positive Updates

Strong Financial Performance

D.R. Horton reported earnings of $2.58 per diluted share with a consolidated pre-tax income of $1.1 billion on $7.7 billion of revenues, marking a solid financial performance for the second quarter of fiscal 2025.

Improved Cycle Times

Construction cycle times improved by a few days from the first quarter and approximately three weeks from a year ago, allowing for faster inventory turnover and increased operational efficiency.

Strong Cash Flow and Shareholder Returns

The company returned all generated cash to shareholders through repurchases and dividends, and plans to repurchase approximately $4 billion of common stock in fiscal 2025, more than double the amount in fiscal 2024.

Stable Cancellation Rates

Cancellation rates remained at the low end of the historical range at 16%, indicating stable buyer commitment despite economic volatility.

Increased Community Count

The average number of active selling communities was up 5% sequentially and 10% year-over-year, indicating geographic expansion and market penetration.

Negative Updates

Decrease in Sales and Order Value

Net sales orders and homebuilding revenues decreased by 15%, with order value decreasing by 17% to $8.4 billion due to affordability constraints and declining consumer confidence.

Decline in Average Closing Price

The average closing price for the quarter was $372,500, down 1% both sequentially and year-over-year, reflecting pricing pressures in the market.

Increased SG&A Expenses

Homebuilding SG&A expenses increased by 4% from last year, with SG&A as a percentage of revenues rising by 170 basis points due to platform expansion.

Lower Gross Profit Margins

Gross profit margin on home sales revenue was 21.8%, down 90 basis points sequentially due to higher incentive costs.

Company Guidance

During the second quarter of fiscal 2025, D.R. Horton reported earnings of $2.58 per diluted share, with consolidated revenues of $7.7 billion and a pre-tax profit margin of 13.8%. The company focused on enhancing capital efficiency, achieving a homebuilding pre-tax return on inventory of 24.3%, a return on equity of 17.4%, and a return on assets of 12.2%. Despite a 15% decrease in net sales orders and homebuilding revenues, the company maintained a gross margin of 21.8% on home sales by strategically balancing pace and price, with cancellation rates at the lower end of historical trends. D.R. Horton anticipates consolidated revenues between $8.4 billion and $8.9 billion and homes closed in the range of 22,000 to 22,500 for the third quarter, while expecting annual revenues between $33.3 billion and $34.8 billion. The company continues to manage its inventory efficiently, with plans to repurchase about $4 billion of its common stock in fiscal 2025.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.