We use cookies to improve your experience, analyze site usage, and show relevant ads. Go to our Privacy Policy for details.
The call conveyed a net-positive operational and financial performance: management delivered margins above guidance, strong order growth (+11% YoY), meaningful inventory reductions (completed unsold homes down 35% YoY), shorter cycle times, strong cash generation ($3.7B trailing 12 months) and continued capital returns (repurchases and dividends). Offsetting items include a decline in EPS (-13.2% YoY), ongoing elevated incentives (~10% of revenue) and some pressure from higher lot costs (+4% YoY) and lower ASPs, plus a modest trimming of the top end of revenue/closings guidance. Overall the positives (profitability, orders, inventory control, cash returns, returns metrics) materially outweigh the negatives, though management noted areas to monitor (incentives, land costs, macro uncertainty).
Management guided third-quarter consolidated revenues of $8.8–$9.3 billion with homebuilding closings of 23,500–24,000 homes, a home‑sales gross margin of 19.7%–20.2% and a consolidated pretax margin of 12.2%–12.7%; they expect starts in Q3 to be lower than Q2 and rental inventory to remain around $3.0 billion. For fiscal 2026 they now forecast full‑year consolidated revenues of approximately $33.5–$34.5 billion, homebuilding closings of 86,000–87,500 homes, an effective tax rate of ~24.5%, operating cash flow of at least $3.0 billion, roughly $2.5 billion of share repurchases and about $500 million of dividend payments.
Consolidated pretax income of $867 million on $7.6 billion of revenue with a consolidated pretax margin of 11.5%, which came in above the high end of guidance. Home sales gross margin was 20.1% in the quarter (19.7% on a normalized basis excluding a 40 bps litigation/warranty benefit) and management expects roughly 19.7% or slightly higher for Q3.
Net sales orders rose 11% year-over-year to 24,992 homes and total order value increased 10% to $9.2 billion, in line with plan and indicating resilient demand at the order level.
Unsold completed homes were down 35% year-over-year (completed unsold homes of 5,500), down 25% from December, and unsold inventory measured 22,900 of 38,200 homes. Median cycle time from start to close improved by almost one month year-over-year and complete-to-close shortened by about one week sequentially, enabling better turns and lower held inventory.
Generated $3.7 billion of cash from operations over the past 12 months and returned approximately $4 billion to shareholders via share repurchases and dividends; in Q2 repurchased 6 million shares for $904 million and paid $130 million in cash dividends.
Trailing 12-month homebuilding pretax return on inventory was 17.6%; consolidated return on equity was 13.2% and return on assets was 8.9% (ROA ranked in the top 20% of S&P 500 companies over multi-year periods), underscoring a returns-focused operating model.
Average price of net sales orders was $366,300 (up 1% sequentially, down 2% YoY). Homes closed were 19,486 (versus 19,276 prior year) with home sales revenues of $7.0 billion, demonstrating relatively stable volume despite pricing headwinds.
Financial services delivered $52 million pretax income on $193 million revenue (pretax margin 26.8%); Forestar reported $374 million revenue on 2,938 lots sold with $44 million pretax income; rental operations generated $12 million pretax income on $212 million revenue and rental inventory around $3 billion.
Consolidated liquidity of $6.0 billion (including $1.9 billion cash and $4.1 billion available credit), book value per share up 5% YoY to $82.91, total debt of $6.6 billion and consolidated leverage of 21.7% with a long-term target around 20%.
Good morning, and welcome to the Second Quarter 2026 Earnings Conference Call for D.R. Horton, America's Builder. [Operator Instructions] Please note, this conference is being recorded. I will now turn the call over to Jessica Hansen, Senior Vice President of Communications for D.R. Horton.
Thank you, Paul, and good morning. Welcome to our call to discuss our financial results for the second quarter of fiscal 2026. Before we get started, today's call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although D.R. Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to D.R. Horton on the date of this conference call, and D.R. Horton does not undertake any obligation to publicly update or revise any forward-looking statements.
Additional information about factors that could lead to material changes in performance is contained in D.R. Horton's annual report on Form 10-K and its most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission. This morning's earnings release and our supplemental data presentation can be found on our website at investor.drhorton.com, and we plan to file our 10-Q later this week. After this call, we will also post our updated investor presentation to our Investor Relations site on the Presentations section under News & Events, for your reference. Now I will turn the call over to Paul Ro...