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D.R. Horton’s (DHI) is soaring this morning following the release of its blowout 3Q25 earnings report, a stark contrast to the muted expectations that had weighed on the shares heading into the event. The subdued sentiment was particularly pronounced after competitors KB Home (KBH) and Lennar (LEN) delivered disappointing results and guidance last month, raising concerns about the broader housing market’s resilience. The market’s enthusiastic response suggests that investors had braced for a weaker outcome, making DHI’s performance a pleasant surprise and underscoring a potential turnaround narrative for the sector.

• Delving into the operational metrics, homes closed -- or deliveries -- declined by 4% to 23,160 units, surpassing the company’s guidance range of 22,000-22,500 homes. This marks a significant improvement from the 15% drop seen in the prior quarter, reflecting a stabilization in demand despite ongoing challenges. Like its peers, DHI has ramped up incentives, including mortgage rate buydowns and price adjustments, to stimulate buyer interest amid persistent affordability constraints driven by elevated interest rates and economic uncertainty, a strategy that appears to have gained traction in the current environment.
• These incentives have undeniably pressured home sales gross margins, yet DHI managed a better-than-expected 21.8% margin, exceeding its guided range of 21.0-21.5%. Several factors likely contributed to this outperformance: disciplined cost management, a strategic focus on smaller, more affordable homes that align with current market demand, and possibly a favorable mix of higher-margin communities. Additionally, the company’s scale as the largest homebuilder in the U.S. may have provided leverage to negotiate better input costs, offsetting some of the incentive-related headwinds and showcasing operational efficiency under pressure.
• The company’s aggressive share repurchase program further bolstered the bottom line, with 9.7 mln shares repurchased during Q3, reducing the share count and enhancing earnings per share. Management’s commitment to returning capital to shareholders remains robust, with an expectation to repurchase $4.2-$4.4 bln in stock for FY25, signaling confidence in its cash flow generation and a strategic move to support stock valuation amid market volatility.
• Turning to guidance, DHI issued in-line FY25 revenue guidance of $33.7-$34.2 bln, a slight refinement after trimming its outlook last quarter, reflecting a cautious yet realistic stance. The company anticipates continued demand headwinds due to affordability constraints, expecting sales incentives to remain elevated in Q4 to sustain momentum. However, the revised FY25 homes closed guidance of 85,000-85,500, down marginally from 85,000-87,000, offers some relief to investors by indicating a controlled deceleration rather than a steep drop, balancing optimism with pragmatism.

DHI’s substantial EPS beat, coupled with in-line FY25 EPS guidance, is driving shares sharply higher today. This performance not only alleviates concerns from the sector’s recent struggles but also positions the company as a potential leader in navigating the challenging housing market, further supported by its shareholder-friendly policies.