D.R. Horton beats Q2 EPS on cost wins; narrows FY2026 closings outlook

Transcript intelligence

What changed

Management narrowed FY2026 guidance, pulling down the top end of the closings and revenue outlook. The headline beat was aided by a one-time ~40 basis-point margin benefit from a favorable litigation outcome and lower warranty costs rather than core pricing power, while net sales orders rose 11% year over year and unsold completed homes fell 35%. Incentives remain elevated at roughly 10% of revenue and are expected to stay high through the year.

Guidance delta

Management lowered the top end of its FY2026 revenue and closings outlook, signaling a more conservative full-year view. For Q3 FY2026 it guided revenue of $8.8-$9.3 billion and 23.5-24.0 thousand homes closed, with gross margin of 19.7%-20.2% and pretax margin of 12.2%-12.7%. Sales incentives remain elevated at roughly 10% of revenue and are expected to stay high through the year.

Key takeaways

• EPS of $2.24 beat the $2.15 estimate (about +4%); revenue of $7.56 billion was essentially in line with consensus.
• Pretax margin of 11.5% exceeded the high end of guidance, helped by a one-time ~40 basis-point benefit from a favorable litigation outcome and lower warranty costs.
• Net sales orders rose 11% year over year and unsold completed homes fell 35%, improving build-to-close cycle times by about a month.
• Sales incentives remain elevated at roughly 10% of revenue and are expected to stay high through the year.
• FY2026 closings and revenue guidance was narrowed, with the top end lowered on slower price growth and inventory considerations.
• Rental operations added $12 million of pretax income from 566 single-family and 216 multifamily rental homes, with inventory held near $3 billion.

Management priorities

• Manage inventory and start pace to market conditions while continuing lot acquisitions.
• Maintain roughly $2.5 billion of FY2026 share repurchases and a $0.45 dividend.
• Sustain affordability-focused pricing for first-time homebuyers (65% of mortgage closings).
• Deepen finished-lot sourcing through Forestar and third-party developers.
• Keep rental inventory near $3 billion to support capital-efficient growth.