By Shaina Mishkin

D.R. Horton, the nation's largest home builder, missed earnings and sales expectations and reduced its full-year guidance as home buyers sat on the sidelines.

The stock was down 3% in premarket trading.

The builder said it earned $2.58 a diluted share on $7.7 billion in revenue in the fiscal second quarter, falling short of FactSet consensus estimates looking for $2.63 a share on about $8 billion in revenue.

D.R. Horton also reduced several aspects of its full-year guidance. It now expects to earn revenue in a range from $33.3 billion to $34.8 billion and close 85,000 to 87,000 homes, down from its first-quarter guidance calling for revenue in a range from $36 billion to $37.5 billion and 90,000 to 92,000 home closings.

"The 2025 spring selling season started slower than expected as potential homebuyers have been more cautious due to continued affordability constraints and declining consumer confidence," said Executive Chairman David Auld.

Waning consumer sentiment and an air of economic uncertainty could pressure home sales, other data suggest. Consumer sentiment toward the housing market dropped to its lowest level in more than a year in March, according to the results of a survey published by Fannie Mae earlier this month. Nearly a third of respondents feared for their jobs -- the largest share on record in the survey, which dates to 2011.

But D.R. Horton's gross homebuilding margin, at 21.8%, was at the midpoint of the company's quarterly guidance range, despite a decrease in orders and homebuilding revenue, Auld noted in a release. That's a bright spot for investors keeping a close eye on the Texas-based builder's margins.

Builders' margins have narrowed as mortgage rates gained. The increase in costs over the past few years, spurred by quicker-than-normal home price gains during the pandemic, and a steep run-up in mortgage rates from historic lows, necessitates that builders offer incentives to keep sales volume up.

"Our tenured operators are responding appropriately to market conditions by increasing sales incentives where necessary to drive traffic and incremental sales, while carefully balancing pace versus price to maximize returns," Auld said in the release.

D.R. Horton's average prices held up relatively well despite the quarter's headwinds, noted Wedbush analyst Jay McCanless. "We will look for more color on this topic, but if DHI does not have to discount aggressively (versus our ests) to drive volume, that may be incrementally positive for the rest of the building industry," he wrote in a note Thursday.

The past several months have been tough for builders, with others issuing weaker than expected guidance or reducing previous full-year expectations. The iShares U.S. Home Construction exchange-traded fund has fallen 13% this year, a larger decline than the S&P 500's 7.9% drop. D.R. Horton's stock has declined 15% this year.

The already-difficult environment for building and selling homes could get more expensive with tariffs. Analysts will be listening closely to Horton's call for more information on how changing tariff policy could impact builders. "Future guidance and management commentary on navigating potential tariffs likely overshadow FY2Q results," Oppenheimer analyst Tyler Batory wrote in an April 8 note.

The company will discuss its results on a conference call at 8:30 a.m. Eastern time.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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April 17, 2025 08:06 ET (12:06 GMT)

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