Horton Inc (DHI)

Horton Inc (DR Horton) Q1 2025 Financial Analysis

Report Date: 2025-04-30
Period Covered: Quarter Ended March 31, 2025

Executive Summary

• Quarterly revenue of $91.072 billion, down from $113.634 billion in Q1 2024.
• Net income attributable to Horton Inc: $8.104 billion, a 30.8% decline Y/Y.
• Total note payable of $65.184 billion, up 10.1% from September 2024.
• Strong cash flow generation but softness in new home orders and closings.

Profit & Debt Analysis

• Homebuilding remains core: Q1 revenue of $72.029 billion, home sale gross margin of 21.8% (down from 23.2%).
• Rental segment: $2.366 billion revenue, pretax margin of 11.4%.
• Forestar (Lot Development): $3.510 billion revenue, pretax margin of 11.6%.
• Financial Services: $2.129 billion revenue, pretax margin of 34.3%.
• Debt: Increase driven by working capital needs and refinancing activity; weighted‐average interest rates rose, leading capitalized interest of $3.715 million (Q1 2025).

Drivers of Performance

• Orders & Closings: Net new home orders declined 19.2% vs. Q1 2024; closings down 14.3%.
• Affordability headwinds: Elevated mortgage rates and constrained consumer confidence have prompted higher sales incentives and moderated pricing power.
• Inventory Management: Total homebuilding inventory rose to $209.1 billion; impairment charges of $54 million booked to adjust land values.
• Segment Dynamics: Forestar land lot sales held up relatively well, but margins tightened on higher land and development costs.

Pros and Cons

Pros:

• Dominant national footprint provides scale benefits and diversified geography.
• Strong cash generation ($2.105 billion net operating cash flow) supports debt service and share repurchases.
• Liquidity cushion: $25.181 billion cash + $20.2 billion undrawn revolver capacity.

Cons:

• Homes sales and backlog down sharply; margins under pressure.
• Rising interest rates elevate financing costs and depress affordability.
• High inventory levels risk further impairment in a sluggish market.

Outlook & Recommendation

Horton’s leading market position and liquidity will help navigate the current affordability challenge. In the near term, continued focus on cost control, incentive management and selective community starts is critical. Watch order trends and leverage ratio compliance; further rate hikes or a deeper slowdown in demand could pressure margins and cash flow.

Q1 2025 Revenues by Segment:

• Homebuilding: $72.029 billion (79.1% of total)
• Rental: $2.366 billion (2.6%)
• Forestar (Lot Development): $3.510 billion (3.9%)
• Financial Services: $2.129 billion (2.3%)
• Other & Eliminations: balance of $10.038 billion (11.1%)

Homebuilding by Region (Q1):

• Northwest: $6.604 billion
• Southwest: $10.637 billion
• South Central: $15.307 billion
• Southeast: $16.138 billion
• East: $13.600 billion
• North: $9.743 billion

Revenue Mix Y/Y Change (Q1 2025 vs. Q1 2024):

• Homebuilding: –20.8%
• Rental: –36.3%
• Forestar: +5.2%
• Financial Services: –5.6%

Horton enters Q2 2025 with a strong balance sheet and substantial liquidity, key for weathering a market marked by high rates and muted buyer demand. The company’s scale and diversified segments (rental, lot development, financial services) provide multiple cash flow streams. However, slowing orders and higher incentives pose margin risks. Management’s emphasis on inventory discipline, cost containment, and leveraging revolving facilities mitigates near-term risk. Over the next 12–18 months, rate normalization and an eventual pickup in affordability will drive recovery. Key challenges include managing leverage as debt climbs and maintaining profitability in a more promotional environment.