D.R. Horton Inc ((DHI)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call of D.R. Horton Inc. presented a mixed sentiment, reflecting both strong financial achievements and some challenges. The company reported impressive financial performance with record pretax income, robust cash flow, and increased net sales orders. However, concerns were raised regarding declining average sales prices, a high cancellation rate, and a decrease in gross margins, suggesting a steady yet cautious outlook for the future.
Record Pretax Income and Revenue
D.R. Horton Inc. reported a consolidated pretax income of $1.2 billion on revenues of $9.7 billion for the fourth quarter. For the fiscal year, the company achieved a consolidated pretax income of $4.7 billion, with a pretax profit margin of 13.8%. These figures underscore the company’s strong financial footing and ability to generate significant revenue.
Strong Cash Flow and Shareholder Returns
The company generated $3.4 billion in cash from operations and returned $4.8 billion to shareholders through repurchases and dividends. Over the past five years, D.R. Horton has returned $11 billion of operating cash flow to its shareholders, highlighting its commitment to delivering value.
Increased Net Sales Orders
Net sales orders in the fourth quarter saw a 5% increase from the previous year, totaling 20,078 homes. The order value also increased by 3% to $7.3 billion, indicating a strong demand for D.R. Horton’s offerings.
Community Growth
The average number of active selling communities rose by 1% sequentially and 13% from the prior year, demonstrating the company’s expansion and growth in its community presence.
Decreasing Average Sales Price
The average closing sales price for the quarter was $365,600, reflecting a 1% sequential decrease and a 3% year-over-year decline. This trend raises concerns about pricing pressures in the market.
High Cancellation Rate
The cancellation rate for the quarter increased to 20%, up from 17% sequentially, indicating potential challenges in maintaining sales momentum.
Gross Margin Decline
The gross profit margin on home sales decreased by 180 basis points sequentially to 20%, driven by higher incentive costs and litigation expenses, impacting overall profitability.
Inventory Reduction
D.R. Horton ended the year with 29,600 homes in inventory, a 21% reduction from the previous year, with 19,600 unsold homes, reflecting efforts to manage inventory levels effectively.
Forward-Looking Guidance
Looking ahead to fiscal 2026, D.R. Horton anticipates consolidated revenues between $33.5 billion and $35 billion, with homes closed ranging from 86,000 to 88,000. The company plans to generate at least $3 billion in operating cash flow and repurchase approximately $2.5 billion of its common stock, signaling confidence in its future performance and strategic initiatives.
In summary, D.R. Horton’s earnings call highlighted a blend of strong financial performance and some market challenges. While the company achieved record pretax income and robust cash flow, issues like declining sales prices and a high cancellation rate warrant attention. Nevertheless, the forward-looking guidance suggests optimism and strategic planning for continued growth.