Last Update 08 Dec 25

Fair value Decreased 0.068%

DHI Will See Lower Rates And Steady Demand Balance Housing Market Risks

We modestly trim our D.R. Horton analyst price target, reflecting analysts' slightly more cautious assumptions on revenue growth and margins, even as they acknowledge support from a lower rate environment. This brings our updated fair value estimate to about $164.69 from $164.80 per share.

Analyst Commentary

Recent Street research on D.R. Horton reflects a mixed but generally constructive stance, with modest target price revisions that balance improving rate dynamics against execution and demand risks. The range of price targets now clusters in the mid to high $150s through mid $170s, suggesting limited multiple expansion but continued confidence in the company’s scale advantages and earnings power.

Bullish Takeaways

Bullish analysts highlight the more accommodative Federal Reserve stance, arguing that a lower rate backdrop should support mortgage affordability and sustain D.R. Horton’s order growth trajectory.
Upward target revisions into the mid $150s and beyond are framed as recognition of the company’s strong execution, particularly its ability to manage costs and maintain solid margins in a slower macro environment.
Supportive commentary emphasizes D.R. Horton’s scale and product breadth as key competitive advantages, allowing it to capture demand across price points and geographies as housing fundamentals normalize.
Some bullish analysts see current valuation as reasonably aligned with medium term earnings growth, suggesting that incremental upside could materialize if volumes or pricing surprise to the upside.

Bearish Takeaways

Bearish analysts are trimming price targets at the margin, reflecting expectations for seasonally softer demand and a more muted near term order environment despite the lower rate backdrop.
Cautious views focus on the risk that housing market activity may not respond quickly to rate cuts, limiting near term revenue acceleration and constraining upside to margin forecasts.
There is concern that valuation already embeds a fair amount of optimism on execution, leaving less room for error if community count growth or cycle times fall short of current projections.
Some bearish analysts stress that while fundamentals remain solid, the risk reward profile appears more balanced at current levels, leading to neutral or market perform stances rather than more aggressive ratings.

What's in the News

President Trump publicly pressed Fannie Mae and Freddie Mac to get big homebuilders going, accusing U.S. builders, including D.R. Horton, of sitting on a record 2 million empty lots, though no specific policy actions have been outlined yet (Reuters).
D.R. Horton issued fiscal 2026 guidance calling for consolidated revenues between $33.5 billion and $35.0 billion, indicating management’s view of sustained demand and community pipeline visibility.
From July 1 to September 30, 2025, the company repurchased 4,561,314 shares for $688.8 million, completing a 12,826,767 share buyback, or about 4.2 percent of shares outstanding, under its April 17, 2025 authorization, reflecting ongoing capital returns to shareholders.
D.R. Horton announced a 13 percent increase in its quarterly dividend to $0.45 per share, payable November 20, 2025 to shareholders of record on November 13, 2025, underscoring its current approach to cash distributions.

Valuation Changes

The fair value estimate has edged down slightly to approximately $164.69 per share from $164.80, reflecting modestly more conservative assumptions.
The discount rate has risen slightly to about 8.74 percent from 8.58 percent, indicating a marginally higher required return on equity.
Revenue growth has been revised down meaningfully to roughly 4.52 percent from 6.24 percent, signaling a more cautious outlook on top-line expansion.
The net profit margin has been reduced modestly to around 10.86 percent from 11.44 percent, incorporating somewhat lower long-term profitability expectations.
The future P/E multiple has increased to about 11.7x from 10.6x, implying a modestly higher valuation applied to forward earnings despite softer growth and margin assumptions.

Structural housing demand, favorable demographics, and expansion into entry-level homes support long-term volume growth, resilience, and broadened buyer appeal amid shifting market conditions.
Vertical integration, efficient operations, industry consolidation, and disciplined financial management enable cost control, margin protection, and consistent market share gains.
Rising affordability pressures, elevated incentives, and reliance on entry-level buyers heighten risks to margins and sales if market volatility and cost inflation persist.

Catalysts

About D.R. Horton

Operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States.What are the underlying business or industry changes driving this perspective?

D.R. Horton is well positioned to capture ongoing demand from the structural U.S. housing shortage and favorable demographic tailwinds, such as millennial and Gen Z household formation and continued suburban migration-supporting sustainable volume growth and topline revenue over the long term.
The company's continued strategic expansion of entry-level and affordable home offerings enables it to address affordability concerns, tap into a wider buyer pool, and maintain high absorption rates, mitigating cyclical margin compression and sustaining revenue even in softer market conditions.
Vertically integrated operations-including strong relationships with lot development partners like Forestar, internal mortgage financing, and focus on operational efficiencies-allow D.R. Horton to control costs, improve inventory turnover, and protect/enhance gross and net margins compared to less integrated competitors.
Consistent and substantial share buybacks, disciplined balance sheet management, and robust operating cash flow generation are likely to drive double-digit returns on equity and support higher earnings per share, regardless of short-term market fluctuations.
Expanding geographic footprint and share gains in Sunbelt/secondary markets, coupled with industry consolidation as smaller builders struggle to compete, position D.R. Horton for incremental market share growth and revenue resiliency as long-term trends continue to play out.

D.R. Horton Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming D.R. Horton's revenue will grow by 6.2% annually over the next 3 years.
Analysts assume that profit margins will shrink from 11.5% today to 11.4% in 3 years time.
Analysts expect earnings to reach $4.7 billion (and earnings per share of $18.78) by about September 2028, up from $4.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $3.7 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.5x on those 2028 earnings, down from 13.4x today. This future PE is lower than the current PE for the US Consumer Durables industry at 11.5x.
Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.56%, as per the Simply Wall St company report.

D.R. Horton Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Rising sales incentives and flat to declining average selling prices indicate ongoing affordability pressures and cautious consumer sentiment, which may result in lower net margins and constrain revenue growth if market conditions remain volatile or worsen.
Lot and land cost inflation, with underlying trends showing mid-single-digit year-over-year increases, poses a structural risk to gross margins if home price appreciation does not offset these rising costs over time.
Heavy reliance on the entry-level and first-time homebuyer market, which comprised 64% of mortgage closings, exposes D.R. Horton to elevated risks from economic downturns, credit tightening, and wage stagnation, potentially leading to higher cancellations and lower sales volumes.
Ongoing need for higher incentives (including mortgage rate buydowns) to sustain sales pace suggests increased competition from both new and resale markets, which could structurally erode gross and net margins if industry-wide pricing power weakens.
Large land and spec inventory positions, while providing operational flexibility, create exposure to impairments and write-offs in a declining market, as exemplified by the recent $16 million in inventory impairments and $36 million in option deposit write-offs, negatively impacting earnings and return on assets.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $162.6 for D.R. Horton based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $199.0, and the most bearish reporting a price target of just $110.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $41.5 billion, earnings will come to $4.7 billion, and it would be trading on a PE ratio of 10.5x, assuming you use a discount rate of 8.6%.
Given the current share price of $177.88, the analyst price target of $162.6 is 9.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Affordable Home Expansion And Suburban Migration Will Drive Resiliency