D.R. Horton Inc. DHI is slated to report results for the third quarter of fiscal 2026 (ended June 30, 2026) on July 21, before the opening bell.
In the last quarter, the company’s earnings beat the Zacks Consensus Estimate by 4.2% but revenues missed the same by 1.3%. However, both metrics declined 13.2% and 2.3% from the year-ago reported figures.
Markedly, D.R. Horton reported better-than-expected earnings in three of the trailing four quarters and missed on one occasion, the average surprise being 4.1%.
How Are Estimates Placed for D.R. Horton Stock?
The Zacks Consensus Estimate for the quarter’s earnings per share (EPS) has been unchanged at $2.99 over the past 60 days. The estimated figure indicates a decline of 11% from the year-ago reported EPS of $3.36.
The consensus mark for revenues is $9.18 billion, indicating a 0.4% year-over-year decline.
D.R. Horton, Inc. Price and EPS Surprise
D.R. Horton, Inc. price-eps-surprise | D.R. Horton, Inc. Quote
Factors Likely Influencing DHI’s Q3 Topline
D.R. Horton’s fiscal third-quarter revenues are expected to have benefited from higher home closing volumes, supported by its broad geographic footprint, entry-level product mix and continued focus on affordability. During the fiscal second-quarter earnings call, management noted that sales followed normal seasonal trends through March and remained encouraging into April. The company also reported an 11% increase in net sales orders in the fiscal second quarter, providing a stronger backlog to support third-quarter deliveries.
However, affordability constraints and cautious consumer sentiment likely remained the biggest headwinds for D.R. Horton’s fiscal third quarter. Elevated mortgage rates and higher ownership costs continued to pressure buyer affordability, prompting the company to maintain elevated sales incentives to support demand. Management has consistently indicated that incentive levels would remain high through the remainder of fiscal 2026, depending on mortgage rates and market conditions.
Despite these challenges, revenues are expected to have improved sequentially, supported by higher home closings and solid order momentum. Management guided for fiscal third-quarter consolidated revenues of $8.8-$9.3 billion and home closings of 23,500-24,000 units, implying a meaningful increase from the second quarter's 19,486 closings.
D.R. Horton's affordable, entry-level product mix, broad geographic footprint and disciplined operations likely supported home closings during the quarter. However, elevated incentives and affordability-focused pricing are expected to have kept average selling prices below year-ago levels, limiting revenue growth despite higher volumes. Demand also remained sensitive to mortgage rates and broader economic conditions.
Meanwhile, Forestar and Financial Services likely provided steady support, while Homebuilding continued to generate more than 90% of consolidated revenues.
Under the Homebuilding segment (which contributed 92% to the fiscal 2025 total revenues), the Zacks Consensus Estimate for DHI’s home sales is pegged at $8.59 billion for the fiscal third quarter, suggesting a rise from the $8.56 billion reported a year ago. The consensus mark for the average selling prices (ASPs) for homes delivered is expected to be $362,000, whereas it reported $370,000 a year ago.
Rental Property revenues (which contributed 4.8% to the total revenues in fiscal 2025) are expected to be $298 million, which implies a decline from the year-ago reported level of $381 million.
Conversely, Forestar revenues (which contributed 4.9% to the total revenues in fiscal 2025) are likely to be $408 million, which indicates growth from the year-ago reported level of $391 million. The Financial Services segment’s revenues (which contributed 2.5% to the total revenues in fiscal 2025) are expected to be $229 million, which indicates slight growth from the year-ago reported level of $228 million.
Factors Likely Influencing DHI’s Margins & Bottom Line
Margins are expected to remain under pressure as elevated incentives continue to offset the benefits of improving construction costs. Management expects fiscal third-quarter home sales gross margin of 19.7-20.2%, reflecting relatively stable profitability sequentially as lower negotiated trade costs begin flowing through completed homes.
However, lower average selling prices and higher incentive spending are likely to have continued weighing on profitability. Lot costs remain elevated, while SG&A expenses could stay relatively high as a percentage of revenues if pricing pressure persists.
On the positive side, faster construction cycle times, lower completed unsold inventory and disciplined inventory management should have supported operating efficiency. D.R. Horton’s strong liquidity, low leverage and continued share repurchases are also expected to have provided support to EPS, even as the company navigates a challenging housing market.
The Zacks Consensus Estimate for income before income taxes for the company’s Homebuilding segment is pegged at $1.02 billion, suggesting a fall from the $1.19 billion reported a year ago.
Orders & Backlog
For the fiscal third quarter, the consensus estimate suggests that net sales orders will rise 4.5% year over year to 24,109 units. The same for backlog is pegged at 17,190 units, which indicates 22.1% growth from that recorded a year ago. The value of the backlog is expected to be $6.52 billion, implying growth from the $5.34 billion reported a year ago.
What the Zacks Model Unveils for DHI
Our proven model does not conclusively predict an earnings beat for D.R. Horton this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.
Earnings ESP: DHI has an Earnings ESP of 0.00%. You can uncover the best stocks before they are reported with our Earnings ESP Filter.
Zacks Rank: The company currently carries a Zacks Rank of 3.
Stocks Poised to Beat Earnings
Here are some companies in the Zacks Construction sector, which, according to our model, have the right combination of elements to post an earnings beat this time around.
Dycom Industries, Inc. DY currently has an Earnings ESP of +0.47% and sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dycom’s earnings beat estimates in the last four quarters, the average surprise being 25%. Dycom’s earnings for the to-be-reported quarter are expected to increase 39.3%.
Owens Corning OC has an Earnings ESP of +1.66% and a Zacks Rank of 3 at present.
For the quarter to be reported, Owens Corning’s earnings are expected to decline 27.3%. OC’s earnings beat estimates in three of the last four quarters and missed on one occasion, the average surprise being 3.8%.
United Rentals URI currently has an Earnings ESP of +1.56% and a Zacks Rank of 2.
The company’s earnings beat estimates in one of the trailing four quarters and missed on the other three occasions, the average negative surprise being 1.5%. United Rentals’ earnings for the quarter are expected to increase 11.2%.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
D.R. Horton, Inc. (DHI): Free Stock Analysis Report
United Rentals, Inc. (URI): Free Stock Analysis Report
Dycom Industries, Inc. (DY): Free Stock Analysis Report
Owens Corning Inc (OC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).