The nation’s largest homebuilder reported $1 billion in net income in the quarter ending June 30, a 24 percent decline from the same period last year, when the company reported a net income of $1.4 billion.
Its home sales gross margin shrank year over year, due in large part to homebuyer incentives. D.R. Horton reported $1.9 billion in gross profit in the quarter, a sequential increase from $1.6 billion in the previous quarter but a year-over-year decline of $344 million from the $2.2 billion in gross home sales profit reported a year ago.
Homebuyer incentives will continue to eat away at the home sales gross margin this quarter, Paul Romanowski, president, CEO and director of D.R. Horton, said.
“The incentives are up, as we’ve spoken to. That’s why we guided to a little lower gross margin into the [current] quarter, but so far, it seems to be doing okay as far as driving traffic and the incremental sales we need,” Romanowski said.
The company’s homebuilding pace has slowed. Homebuilding revenue dropped 7 percent to $8.6 billion compared to $9.2 billion a year ago. The number of homes sold also decreased year over year from 24,155 to 23,160.
When asked about the effect of tariffs, chief financial officer Bill Wheat said “stick and brick” costs are moderating.
“But our commentary really over the last year has been that incentives have been increasing. That’s been the main driver for the gross margin decline over the last year,” he said.
The company partially pinned its hopes on an interest rate change.
Incentive levels and home sales gross margin this quarter will depend on the strength of demand, changes in mortgage interest rates and other market conditions, said Jessica Hansen, vice president of investor relations.
Despite the year-over-year decline, the quarter saw a sequential improvement after neither of the last two quarters cracked $1 billion in net income. D.R. Horton stock rose 6.7 percent after the company published its revenue outlook.
The company’s revenue outlook for fiscal year 2025, which started Oct. 1, narrowed slightly. D.R. Horton issued guidance in April that consolidated revenues for the year were expected to fall between $33.3 billion and $34.8 billion; today, the range shrank to $33.7 billion and $34.2 billion.
Alan Ratner’s concern: “it looks like the average FICO score of your buyer is down about 5 points year-over-year. It’s the lowest it’s been in quite a while. LTV — combined LTV is ticking higher as well.”
Paul Romanowski, prez, CEO and director: “The incentives are up as we’ve spoken to. That’s why we guided to a little lower gross margin into the fourth quarter, but so far, it seems to be doing okay as far as driving traffic and the incremental sales we need.”
Jessica Hansen, VP of Investor Relations: ”The incentives are up as we’ve spoken to. That’s why we guided to a little lower gross margin into the fourth quarter, but so far, it seems to be doing okay as far as driving traffic and the incremental sales we need.”
Bill Wheat, Executive VP & CFO: “I mean we have seen slight improvement in our stick and brick cost, and so that is a partial offset. But our commentary really over the last year has been that incentives have been increasing. That’s been the main driver for the gross margin decline over the last year. Our operators are striving every day to strike the best balance between hitting pace and maintaining margin in each community to maximize returns. And so they’re using all the levers they have with incentives to try to balance that.
And so we have seen the pace of incentive cost increases and the pace of margin decline moderate a bit over the last couple of quarters. And in this quarter, it held still flat sequentially, but the trend is still pointing towards a bit higher incentives. And we don’t see significant offsets to that, though we will continue to work on costs on the construction side.”
Quarter earnings – $3.36 per diluted share, down from $4.10 in Q3 2024
Consolidated pretax income – $1.4b on $9.2b of revenues
23,160 homes closed – sales gross margin of 21.8%
Tepid market but cancellations low
Hoping for changes in mortgage interest rates
Read more
DR Horton’s Forestar targets Gulf Coast population growth
U.S. records yearly surge in home listings
These are the top U.S. home builders in 2025
